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Common errors in applying the market value concept

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Published on 01 Jul 15 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

Despite the widely accepted definition of market value based on the High Court decision in Spencer v The Commonwealth, the application of the market value concept in practice has been subject to errors and dispute, with flow on tax and duty consequences. There are broadly two interrelated types of errors associated with the application of the market value concept: conceptual errors and measurement errors. This article examines some of the most common conceptual errors. These include failure to recognise the asset focus of the Spencer market value concept, failure to recognise the negotiated price focus of the Spencer market value concept, adoption of an incorrect unit of measurement, and adoption of an incorrect view of the impact of non-transferability on market value. The authors argue that recognition and avoidance of the errors discussed in this article are important in achieving a correct valuation outcome for tax and duty purposes.

Author profiles

Dr Hung Chu
Hung is a Director of Lonergan Edwards & Associates Limited. Dr Hung Chu completed his master degree in Finance and Banking (with Merit among the top 2% of graduates) from the University of Sydney and his doctoral degree in Finance from the University of Technology, Sydney (graduated on Chancellor's List for Exceptional Scholarly Achievement in PhD research). He has 12 years of experience in the provision of valuation services and numerous technical papers published in academic and practitioners' journals. - Current at 11 July 2019
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Wayne Lonergan
Wayne is an internationally distinguished practitioner with over 40 years valuation experience in takeovers and mergers, litigation including loss assessment, tax, stamp duty and other regulatory purposes. Wayne is the author of two leading valuation texts and over 100 published technical papers in various leading industry journals. - Current at 11 July 2019
Click here to expand/collapse more articles by Wayne Lonergan .

 

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