Following the recent release of Labour’s capital gains tax (CGT) policy, details surrounding the handling of property valuations remain uncertain until after the election.
Under the proposed CGT policy, profits from the sale of commercial and residential properties would be subject to a 28 percent tax, while exemptions would apply to the family home, farms, and other assets.
Key details yet to be clarified include:
• Types of valuation methods available
• Responsibility for covering the costs of valuations
• Procedures for contesting valuations
• Consequences for properties not valued within the specified timeframe
Labour’s finance spokesperson, Barbara Edmonds, mentioned that guidance from Inland Revenue would be essential to strike a balance between accuracy and simplicity for taxpayers. The party aims to finalize these details post-election, if successful.
Options for valuation methods discussed in the Tax Working Group (TWG) report include Rateable Value (RV) and comparison with similar properties in the area, with the latter potentially utilizing an Automated Valuation Model (AVM) by companies like Cotality or QV.
While physical inspection by a valuer is considered the gold standard, it may not be practical for every property. An AVM valuation for all properties on the designated date could offer a more efficient solution, albeit with additional costs.
In cases where property owners fail to obtain valuations within the designated timeframe, the TWG recommended a default valuation method, such as a “straight line” approach from the last sale price to the current date.
As taxpayers await further clarity on these matters, the implications of Labour’s CGT policy on property valuations remain a significant post-election consideration.
