Taxpayer’s valuation methodology preferred for valuation – Moloney’s case Background
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Taxpayer’s valuation methodology preferred for valuation – Moloney’s case

- 13 June 2024

In Moloney and FCT [2024] AATA 1483, the AAT considered whether the taxpayer satisfied the Maximum Net Asset Value Test.

A key issue was the market value of the shares in a trading company which were transferred as part of an internal restructure.

The transfer price was $3,500,000.  This was based on an initial valuation obtained by the taxpayer.

The Commissioner argued that the market value of the shares was higher.  He sought to rely on a valuation that he had commissioned which effectively valued the shares at $7,000,000.

The taxpayer sought to rely on a subsequent valuation that it had commissioned which effectively valued the shares at $3,000,000.

Both valuations were prepared using the capitalisation of maintainable earnings methodology.

The AAT considered both the Commissioner’s valuation and the taxpayer’s subsequent valuation.  In this regard, the AAT considered evidence from both valuations re:

  • Maintainable EBITDA
  • Capitalisation multiple
  • Trading multiples
  • Transaction multiples
  • Survey data
  • Notional Realisation of Assets

In doing so, the AAT was more persuaded by the reasoning and methodology used in the taxpayer’s subsequent valuation rather than the Commission’s valuation.

The AAT concluded that, based on the AAT’s view as to which parts of the evidence were more or less persuasive, the valuation should be $3,352,500.

This was effectively a new valuation based on a piecing together of which parts of the evidence were more or less persuasive and an application of those to the facts.

As a result, the taxpayer was held to have satisfied the Maximum Net Asset Value Test (after other assets not relevant to the discussion above were included).