Valuation requirements for CGT changes to 'completely swamp' industry, IPA warns

This will "significantly increase compliance burdens" for taxpayers he said, and will mean that many taxpayers require the assistance of a tax practitioners to navigate the complexities of the proposed hybrid system.

In the explanatory memorandum for the reforms, Treasury said it had estimated that the CGT and negative gearing changes would increase regulatory costs by $88.4 million per year for individuals and businesses, over ten years.

Speaking before the Economics Legislation Committee on Tuesday, Greco said this figure by Treasury "grossly underestimates" the compliance costs, with valuations for illiquid assets in particular likely to cost a substantial amount. 

"[With these tax changes] we're almost forcing people to get a valuation for these illiquid assets," he said.

CA ANZ Australian leader of tax, superannuation and financial advice, Susan Franks agreed that a lot of the costs would come from the need to value assets as of 1 July 2027 from a CGT perspective.

"People will need to get valuations. If you own a publicly listed company, that's relatively easy, you just get it from the stock market," Franks.

Franks said that for listed assets, it may even be possible for the ATO to capture that information and make it available via pre-fill.

"[However], those that have investment in private companies or need to value goodwill, valuations can be quite expensive so there's going to be substantial costs," she said.

"There will also be an increase in compliance costs in that when you sell and asset that you own now, you'll have to do two calculations, one for pre- 1 July 2027 and one for post - 1 July 2027.

"You've got four different classes of assets and four different classes of losses, which you need to keep track of, which will require the help of a tax agent."

In its submission, CA ANZ said its members were "already being inundated with calls from clients about the impact of these changes".

"To assist everyday Australians in understanding these changes, the ATO will need to provide simple flow diagrams to step taxpayers through the compliance process as a matter of urgency," the body aid.

CA ANZ warned that taxpayers who do not obtain appropriate valuations as contemporaneously as possible to 1 July 2027 or that are acceptable to the ATO will be forced to choose to use the alternative methodology which may result in more tax.

"Additional complexity will also exist for taxpayers who hold share portfolios where different parcels of shares in the same company are bought (including through dividend reinvestment) and sold over time where the CGT consequences on specific asset identification as to whether it is a pre-1 July 2027 or post parcel may be materially different. CGT asset registers will become more complex," the body said.