Market value is the price a property would sell for on a given date between a willing but not anxious buyer and a willing but not anxious seller, both acting knowledgeably and at arm's length. In Australia this test comes from the High Court's decision in Spencer v Commonwealth (1907), and the ATO applies it for tax.
Where does the definition come from?
In Spencer v Commonwealth (1907) 5 CLR 418 the High Court described value as the price a willing purchaser would pay a willing (but not anxious) vendor, both aware of everything that might affect the value. Courts, valuers and the ATO still start from that test.
Market value vs sale price
A sale price is what one buyer actually paid. It can be above or below market value because of a rushed sale, a sale between family members, or a buyer who particularly wanted that property. That is why related-party transfers usually need an independent market value.
Market value vs an agent's appraisal
An agent's appraisal is an estimate of what a property might sell for, usually to win a listing. It isn't prepared to a valuation standard or signed as a valuation. For tax, SMSF and estate records, a signed market valuation is the usual evidence.
Market value on a past date
The same test applies on a past date, using the sales evidence and market conditions around that date. See retrospective valuations.
Questions
What is the definition of market value for property?
The price a property would sell for on a given date between a willing but not anxious buyer and seller, both acting knowledgeably and at arm's length.
Is an agent's appraisal the same as a valuation?
No. An appraisal estimates a likely sale price, usually for a listing. A valuation is a signed opinion of market value on a stated date for a stated purpose.
Sources
This guide is general information, not tax, financial or legal advice. We value property; your accountant, auditor or lawyer decides how a value is used and what evidence they accept. The ATO does not approve or accredit valuers or valuations for CGT purposes.