Common Issues with Formal Business Valuation Reports

Accredited Business Valuation Specialists are required to adhere to professional standards and regulatory guidelines whilst preparing formal business valuation reports. The Australian Taxation Office (whom regularly audits business valuations) notes a wide range of common errors that it sees in tabled reports.

Everyday Errors and Issues

The Australian Taxation Office is increasingly conducting reviews of valuation reports to ensure compliance with applicable laws. As part of the ATO’s Market Valuation guidance published October 2022, the ATO reports the following common compliance issues:

  • Inappropriate Methodology

Use of valuation methods that are unsuitable for the circumstances or not aligned with industry standards.

  • Incorrect Application of Method

Errors in how methods (e.g. discounted cash flow, capitalisation of earnings) are applied, often inconsistent with accepted professional practice.

  • Non-Compliance with Legal Frameworks

Valuations that do not reflect relevant tax law, superannuation rules, case law, or ATO guidance.

  • Unreasonable Assumptions

Use of unrealistic inputs, historical data as a proxy without justification, or assumptions not grounded in evidence.

  • Omission of Relevant Information

Failure to consider material facts available at the valuation date, including financial, operational, or legal information.

  • Inconsistencies with Supporting Evidence

Discrepancies between the valuation and documentation such as contracts, shareholder agreements, or financial records.

  • Use of Hindsight

Inappropriate reliance on post-valuation date events or forecasts not foreseeable at the valuation date.

  • Incorrect Asset Apportionment

Errors in allocating value between tangible and intangible assets or across entities.

  • Unsupported Adjustments

Lack of justification for risk adjustments, discount rates, or capitalisation multiples.

Market valuations for tax purposes must be objective, independent and supported by appropriate evidence.
  • Weak Base Analysis

Insufficient review of core financial and operational data used in the valuation.

  • Averaging Errors

Inappropriate use of averages where more detailed analysis is required.

  • Lack of Market Evidence

Inputs and assumptions not supported by independent market data.

  • Failure to Verify Inputs

Use of subjective or unqualified assumptions without validation.

  • Documentation Gaps

Missing critical assumptions, explanations, or working papers needed to support the valuation conclusions.

Let’s start a conversation!

1300 817 774

info@bspstrategic.com.au