Given the inherently subjective nature of valuations there is also room for legitimate disagreement as to the precise application of the principles in a particular statutory context. The decision in Commissioner of Taxation v Resource Capital Fund III LP (the RCF decision) is but one example of that. In RCF the valuers for the Commissioner and the taxpayer, the first instance Judge and the Full Federal Court all agreed on the relevant principles but they disagreed on the appropriate methodology for applying them in the relevant statutory context. Given that small differences in valuation approach can lead to significantly different tax consequences, this remains a fertile area for disputes.
The Inspector General of Taxation made a series of recommendations last year concerning reducing the need to conduct valuations and aimed at preventing disputes from arising. These include ATO compliance officers seeking to agree or disagree on relevant legal or factual issues, considering in appropriate cases the joint appointment of valuers with taxpayers and facilitating valuer conferencing to seek to narrow issues. The ATO has agreed with almost all recommendations and has identified valuation disputes as a particular area where alternative dispute resolution processes are often appropriate.
When you are instructing a valuer you should have regard to the ATO market valuation guidelines which set out what the ATO considers is a 'good valuation' although there is little similar guidance from the State revenue authorities.
Consider also whether:
it may be appropriate to seek to agree upfront with the relevant revenue authority the relevant facts and/or legal issues and even, potentially, methodology; and/or
you may wish to suggest the joint appointment of a valuer.
If you do find yourself in a valuation dispute, you should consider whether your expert valuers should meet to seek to identify any areas of agreement and narrow the areas of disagreement. If you did ever have to litigate the matter, a Court would likely require this to occur in any event.
http://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/tax-insights/Pages/considerations-re-valuations-22-april-2015.aspx
