Don’t rely on a lender’s valuation for CGT

When a property first becomes income producing the cost base is reset to the value at the date it becomes income producing.

Many people want to save a few hundred dollars by not ordering a valuation, but rather rely on a bank’s valuation. This could be potentially costing them  thousands of dollars.


Ned moves out of his property and gets his broker to order a bank valuation which comes in at $475,000. Ned thinks this is a bit low and asks for another valuation, but the bank refuses and so he doesn’t really think about it any further.

Maude, Ned’s wife, orders a private valuation for tax purposes which comes in at $500,000.  When the property is later sold for $600,000 there will be a difference in the cost base:

  • 1st Valuation will make the gain to be $125,000
  • 2nd valuation will make the gain to be $100,000Applying the 50% CGT discount these become: $62,500, or $50,000
    Added on to their marginal tax rates of 39%: $24,375 in CGT or $19,500
    Taking the time to order a second valuation has resulted in a tax saving of $4,875.

Not bad tax saving when the advice only cost $660!


This article was written by Terryw from:

  • July 2, 2018
  • CGT