The value spread is shown to be positively related to the value premium in the Australian market. The relationship is especially strong for small cap portfolios and typically stronger when using the book-to-price ratio than other value metrics. In small cap portfolios, the positive value premium–spread relationship is primarily driven by the short side. Our results are consistent with previous findings in US and Asian markets. We also show that the small cap–large cap value spread differential is positively related to the corresponding value premium differential, suggesting the value spread can also be used for timing the large/small cap tilt.