Why you shouldn’t rush to value your property ahead of 2027 tax change

Under the new capital gains tax rules, some properties may need a market value established at June 30, 2027 so that gains accruing before and after July 1, 2027 can be calculated. Given the huge number of properties potentially involved and the relatively small number of valuers, should property owners arrange a valuation before June 30, or will the tax office accept a retrospective valuation done later? We are confused because we have heard two different views. Furthermore, do we need a registered valuer?

An Australian Taxation Office spokesman tells me there is no need to rush out and have your property valued before June 30, 2027. In fact, if you intend to rely on a market valuation, you should not obtain one now. A prospective valuation – one prepared before the specified valuation date – will not be acceptable. A retrospective valuation prepared later can be used and, in many cases, may be preferable because the valuer will then have access to a broader range of records and comparable sales around the relevant date, allowing a more informed assessment.

There is another important point. The new rules apply to capital gains accruing from July 1, 2027, but tax is generally not payable until the gain is eventually realised, such as when the property is sold. If you choose to use a valuation-based method to work out your tax consequences, you will only need the valuation, at June 30, when preparing your tax return in the year of disposal and self-assessing your taxable gain. You may, of course, choose to obtain the valuation earlier.

Importantly, not every affected property will necessarily need a formal valuation. Taxpayers may have a choice between establishing the property’s market value immediately before 1 July 2027 and using an alternative apportionment method the Government is developing. The Tax Office says it will provide further guidance, tools and calculators once the legislation and method are settled.

As for whether you need a registered or professional valuer, the tax office says that, for tax purposes, the acceptability of a valuation usually depends on the valuation process and the asset being valued rather than simply on who conducted the valuation. There are exceptions – for example, a professional valuer is required for a market valuation for GST margin scheme purposes. The tax office also points out that valuations undertaken by professional valuers are generally more credible than those prepared by somebody who is not a professional valuer.

But engaging a professional does not shift the responsibility. The onus remains on the taxpayer to provide a valuation that is replicable and defensible. The tax office says its forthcoming guidance will give more detail on how market values may be determined for different types of CGT assets, the types of professionals taxpayers may wish to engage, and the documents and records that should be kept.

Meanwhile, the message is simple: don’t panic and don’t pay for a valuation now. If a market valuation is eventually required, it can be prepared retrospectively for June 30. And before spending money on a professional valuation, wait for the tax office’s detailed guidance on exactly what will be required.

Under the proposed capital gains tax changes, I understand that if I buy shares now, they will effectively be treated as having been sold on June 30 and repurchased on July 1. Suppose they have risen in value by June 30, but I have owned them for less than 12 months. Does that mean the gain before July 1 will not qualify for the 50 per cent CGT discount and will ultimately be taxed at my marginal rate when the shares are sold? Given the 12-month rule, could there be a case for delaying some share purchases until after June 30?

Technically, there is “deemed disposal” on June 30 and re-acquisition on July 1, however, any capital gain/loss is disregarded and deferred until when the shares are eventually sold.

The value at that date will be used to calculate the pre-July 1 component of the capital gain when you eventually dispose of the shares.

Provided you have owned the shares for at least 12 months by the time you actually dispose of them, the pre-July 1 component will still qualify for the 50 per cent CGT discount. Therefore, the fact that you may have owned the shares for less than 12 months at June 30 does not, by itself, cause you to lose the discount.

I am 70, retired and drawing a flexi pension from my UniSuper balance, currently around $975,000. My wife is 63, also retired, and has about $1.35 million in UniSuper. We have decided to preserve her super for as long as possible and live on mine until it is eventually exhausted. We own our home and have no other significant assets.

Given our ages and super balances, could either of us qualify for the age pension or a part pension? How would Centrelink treat my wife’s super while she is still under the pension age, and what happens once she reaches that age?

Your wife’s super will not count for the asset test until she reaches pensionable age, which is 67, unless she starts to draw a pension from it. Depending on your other assets, you may be eligible for a part pension, provided your total assessable assets do not exceed $1,121,000. If your total assessable assets are a little over the cut-off point, you could seek advice about investing in one of those lifetime income-stream products, where generally only 60 per cent of the purchase price is initially counted for the assets test. This could give you a tiny pension, plus an income stream.

But they’re highly specialised, so make sure you understand the product if you decide to choose one. You may also be eligible for the Commonwealth seniors health card, subject to the income test.

I’m considering giving both my adult children some money to contribute to super. One is a low-income hospitality worker and the other is a stay-at-home mum. They are in their 30s, and I’m thinking of perhaps $10,000 to $20,000 each. I realise they may have more immediate uses for the money, but I’m also conscious of the power of compounding if the money goes into super at their age. Is contributing to their super a worthwhile strategy, and what contribution and tax issues should we consider?

I understand what you mean about compounding. Putting $10,000 or $20,000 into super in their 30s gives the money decades to grow, but the downside is that it will generally be inaccessible until they reach preservation age, which for both of them will be 60, and satisfy a condition of release.

However, if they are likely to buy their first home in the future, consider the First Home Super Saver (FHSS) scheme. You could give them the money and they could then make eligible personal voluntary contributions to their own super. This distinction is important because contributions made directly into their super by a parent are not eligible for the FHSS scheme. They can have up to $15,000 of eligible voluntary contributions in any one financial year count towards the scheme, up to $50,000 across all years, plus associated earnings.

Importantly, if they never buy a home, the money is not lost. It simply remains in super under the normal rules and can generally be accessed from age 60 once they retire or otherwise satisfy a condition of release. So the real question is whether they are better off having the money available now or locking it away for either a first home or retirement.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: noel@noelwhittaker.com.au.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.