Capital Gains Tax (CGT) is one of the most important tax considerations for Australian property owners and investors. When a property is sold or transferred, you may be required to pay CGT on the increase in its value since it was acquired. To calculate this accurately, a professional property valuation is often required—especially in cases where market value must be substituted for purchase price.
What Is Capital Gains Tax (CGT)?
CGT is a tax on the profit made when you sell an asset, such as real estate, for more than you paid for it. It applies to:
- Investment properties
- Commercial real estate
- Vacant land
- Holiday homes
- Inherited property (in some cases)
Your main residence is generally exempt from CGT, but exceptions apply, particularly if you rent it out or use it to produce income.
When Do You Need a Property Valuation for CGT?
There are several situations where the ATO requires a market valuation instead of using the original purchase price. These include:
Pre-CGT Assets
If the property was acquired before 20 September 1985, it’s considered a pre-CGT asset. When it’s sold or inherited, a valuation may be needed to determine its market value at the date CGT starts to apply.
Change of Use
If you convert your main residence into a rental property, CGT applies from the date of change. A market valuation is used as your cost base going forward.
Inherited Property
While inheritance itself is usually CGT-free, you may need a valuation to establish the property’s market value at the date of death, which becomes your cost base for future sale.
Related-Party Transactions
When property is sold or transferred to a family member or related entity, the ATO requires a market-based valuation to avoid undervaluation.
No Records of Purchase Price
If you’ve lost your contract of sale or original records, a valuation can help establish a retrospective cost base for CGT purposes.
How Is a CGT Property Valuation Conducted?
A Certified Practising Valuer (CPV) will assess the property’s market value on a specific date using accepted methods such as:
Direct Comparison
Analyses recent comparable sales of similar properties in the same area, adjusted for condition, size, and other attributes.
Capitalisation of Income
Used primarily for rental or commercial properties, this method estimates value based on income potential and yield.
Retrospective Valuation
The valuer provides a current estimate of what the property would have sold for at a historical date—commonly the date of acquisition, inheritance, or CGT liability.
The final report includes:
- Valuation date
- Full property description
- Methodology
- Comparable sales evidence
- Conclusion and justification of value
This document must be defensible and supported by market data to satisfy ATO requirements.
Who Can Provide a CGT Valuation?
The ATO recommends using a qualified, independent valuer, especially in complex or high-value situations. Acceptable professionals include:
- Certified Practising Valuers (API members)
- Licensed real estate agents (in basic cases, though not always accepted for legal purposes)
- Quantity surveyors (only for certain cost-based elements)
- Accountants (rarely, and only if they have valuation expertise and access to evidence)
For most CGT cases, particularly those involving retrospective values or commercial assets, a CPV is the preferred choice.
Cost of Property Valuation for CGT in Australia
| Property Type | Estimated Fee Range |
| Basic residential property | $500 – $1,200 |
| Commercial or rental property | $1,200 – $2,500 |
| Retrospective or complex assets | $1,500 – $3,500+ |
| Portfolio or multi-property CGT | $3,000 – $6,000+ |
Fees may increase for properties with limited comparable sales, unusual improvements, or mixed-use designations.
Tips for a Smooth CGT Valuation Process
- Engage a valuer early, especially if preparing your tax return or estate plan
- Keep detailed records of improvements, ownership changes, and property usage
- Confirm with your accountant which date needs to be assessed
- Ensure the valuer is briefed on the purpose of the valuation (CGT-specific)
- Store the valuation securely in case of an ATO audit or review
Conclusion
Capital Gains Tax can have a significant financial impact, and a professional property valuation ensures that your CGT obligations are calculated fairly, accurately, and in compliance with ATO standards.
Whether you’re selling an investment, transferring a family asset, or converting your home into a rental, a CGT valuation helps protect your financial position and provides evidence for your tax records.
To ensure a compliant and reliable CGT property valuation, always engage a certified valuer familiar with Australian tax law and market conditions.
