Valuation for a transfer to or from your company or trust

Moving a property into a family company or trust, or taking it out again, can feel like moving it between your own pockets. For capital gains tax it is generally a CGT event, and the price on the paperwork is not always the figure the law uses. This page explains when market value comes in, which date it is at, and how we handle these requests.

How capital gains tax treats these transfers

Section 116-30 of the Income Tax Assessment Act 1997 uses market value instead of the price in two common cases:

• Nothing is paid. If you transfer property to your company or trust and receive nothing for it, you are generally treated as receiving its market value.
• The price is not at arm’s length. If you and the company or trust are not dealing with each other at arm’s length, and the price is more or less than market value, market value is generally used instead.

The ATO says you deal at arm’s length when each party acts independently and neither exercises influence or control over the other in connection with the transaction, and that the law looks at the relationship between the parties and the quality of the bargaining between them. Its page on market valuations lists non-arm’s length transactions, including transfers of property between related parties, among the purposes a market valuation is used for. Your accountant decides whether you are dealing at arm’s length.

For the company or trust receiving the property, the same market value is generally the starting point of its cost base (section 112-20).

What about transfers the other way?

The same idea generally applies when property moves from a company or trust to you. A company that sells or gives you property without dealing at arm’s length is generally treated as receiving market value (section 116-30). When a trust passes property to a beneficiary, the trustee’s gain is generally worked out from the property’s market value at that time (sections 104-75 and 104-85).

Other tax rules can apply to these transfers as well, so your accountant advises on the whole transaction.

Which date is the property valued at?

The time of the CGT event, which depends on how the transfer happens:

• A sale under a contract. Generally the date the contract is made, not settlement (section 104-10).
• A transfer with no contract. When the change of ownership occurs.
• A transfer to an existing trust. The Act sets the time as when the property is transferred (section 104-60).

Tell us every relevant date, such as the contract, transfer and settlement dates, and your accountant confirms which one to use. See contract or settlement date.

If the transfer has not happened yet, talk to your accountant about timing before you ask for a valuation. The ATO’s guide says a valuation for a future date is not acceptable for tax, and a value at today’s date describes today’s market, not the market on the day the property changes hands.

If the transfer happened years ago, the property can still be valued as it was on that day, using sales of comparable properties from around then. See valuing at a past date.

Roll-overs and other rules

Some transfers are treated differently. For example, an individual or a trustee who transfers property to a company they wholly own can, in some circumstances, choose a roll-over (Subdivision 122-A, from section 122-15), and a roll-over may also be available for some small business restructures.

The basic main residence exemption is for individuals (section 118-110), so moving your home into a company or trust can change how a later gain is treated. Your accountant decides which rules apply.

If the buyer is your self-managed super fund, super law has its own rules for buying from a related party: see SMSF property.

Why we quote these transfers first

Stamp duty on these transfers is assessed separately by each state or territory revenue office, so we quote them first. This is how a request works:

1. Request online. The request form groups these transfers with family transfers, so choose “I am transferring it to family” as the reason, and say in the notes that the property is moving to or from a company or trust.
2. Tell us every purpose the report is for and who will rely on it, such as you, the company or trust, and your accountants. The ATO’s guide warns that difficulties are likely when a previous valuation compiled for a different purpose is relied on.
3. We look at the property, the dates and those purposes, then confirm in writing whether we can take it on and, if we can, the valuer, the fee and the timing.
4. Nothing is booked or charged until you accept the quote.
5. You receive a signed PDF report by email, reviewed and signed by a property valuer.

A report can be relied on by the client named in it and anyone we agree to in writing. If both sides of the transfer will rely on it, say so at the start.

What to send with your request

• the address and the type of property
• who is transferring it to whom, for example from you to your family trust
• the contract, transfer and settlement dates, as they apply
• photos from around the date, including any sales or rental listing
• plans, approvals and invoices for renovations or extensions, with dates
• for apartments and townhouses, strata records of any major works
• if the property is rented, the lease and the rent at the time

Records of the property as it was on the day help the valuer most, especially if it has changed since. How property is valued for CGT explains what the valuer does with them.

What we do not cover

A valuation from us is not prepared for stamp duty assessment, mortgage lending, family law or court proceedings. Commercial, rural and development property, and anything likely to be worth more than $3 million, is quoted before anything is booked. We value property in New South Wales, Victoria, the ACT and the Northern Territory only.