Income tax: capital gains: in what circumstances does the expression 'proceeds cannot be valued' in paragraph 116-30(2)(a) of the Income Tax Assessment Act 1997 (market value substitution rule) apply?

The expression applies if capital proceeds cannot be valued at all. Situations where capital proceeds cannot be valued are likely to be rare. Paragraph 116-30(2)(a) of the Income Tax Assessment Act 1997 (the capital proceeds market substitution rule) does not apply if valuing capital proceeds is merely difficult, costly or inconvenient.

As a matter of policy, it is inappropriate to apply the market value substitution rule to deem the market value of an asset to constitute the capital proceeds from a CGT event if it is at all possible to value the capital proceeds received. The substitution of market value should, therefore, be used in these circumstances only as a last resort.

The above analysis also applies to expenditure that cannot be valued in paragraph 112-20(1)(b) (the cost base market value substitution rule).