Capital Gains Tax — Business Valuations
A CGT position is only as strong as the valuation behind it.
When a business, a parcel of shares or a unit holding changes hands, the tax outcome turns on one figure: market value at the relevant date. We prepare independent, fully reasoned valuations of businesses and equity interests — current or retrospective — documented to meet the ATO’s stated requirements for market valuations.
The number is rarely challenged at the time. It is challenged later.
Why It Matters
A CGT event is usually reported on a figure prepared quickly, under transaction pressure, by someone close to the deal. It goes into the return and nothing happens — until a review, an audit, a shareholder dispute or a family law matter reopens it years afterwards.
By that point the position has hardened. The taxpayer must defend a market value they may never have documented, using evidence that may no longer exist, at a date they can no longer observe. Contemporaneous records are the only thing that helps, and the time to create them has passed.
The consequences are not limited to a revised assessment. Where the valuation supported an eligibility test — the maximum net asset value threshold, the active asset test, the small business concessions — a movement in value does not merely adjust the tax payable. It can remove the concession altogether.
The reverse is just as common and far less discussed: a business valued conservatively, or on an unsupported rule of thumb, can produce a cost base that overstates the eventual gain. Tax is paid that was never payable, and nobody in the chain has any reason to go looking for it.
Built to be read by a reviewer, not just by you.
How We Work
Circumstances that call for a business valuation.
When It’s Required
Some are obvious at the time. Others are only identified by an adviser reading the legislation carefully — or by the ATO reading the return.
The ATO does not assess a figure. It assesses the process behind it.
The Evidence Standard
Its guidance requires a valuation to objectively demonstrate the process undertaken, in accordance with valuation industry practice. That single requirement determines what holds up and what does not.
What the report contains.
The Deliverable
A signed valuation report prepared for taxation purposes — written so your accountant, your lawyer, and if necessary a reviewer at the ATO can follow it without calling us to explain it.
The event was years ago. The valuation still has to be as at that date.
Retrospective Valuations
A retrospective business valuation is not a present-day valuation adjusted backwards. It requires the valuer to reconstruct what a hypothetical willing buyer and willing seller knew — and did not know — at the relevant date, and to exclude everything that has happened since.
That distinction matters more than it sounds. A business that has since prospered cannot be valued with the benefit of that knowledge. A business that has since failed cannot be marked down for it. The evidence used must be evidence that existed at the date, and the report must show that it was.
This is where retrospective valuations most often fail on review: hindsight leaks into the analysis, and the reasoning cannot be defended once that is pointed out.
We prepare retrospective valuations for restructures that were never documented, estates settled long after the date of death, shareholder disputes reopened years later, and pre-CGT questions requiring value at historical testing dates. The further back the date, the more the outcome depends on the discipline applied to the evidence.
From enquiry to signed report.
How It Works
A retrospective business valuation is not a present-day valuation adjusted backwards. It requires the valuer to reconstruct what a hypothetical willing buyer and willing seller knew — and did not know — at the relevant date, and to exclude everything that has happened since.
That distinction matters more than it sounds. A business that has since prospered cannot be valued with the benefit of that knowledge. A business that has since failed cannot be marked down for it. The evidence used must be evidence that existed at the date, and the report must show that it was.
This is where retrospective valuations most often fail on review: hindsight leaks into the analysis, and the reasoning cannot be defended once that is pointed out.
We prepare retrospective valuations for restructures that were never documented, estates settled long after the date of death, shareholder disputes reopened years later, and pre-CGT questions requiring value at historical testing dates. The further back the date, the more the outcome depends on the discipline applied to the evidence.
FAQs
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A business valuation is an independent assessment of the value of a business or business interest. It may be required for business restructuring, sale or acquisition, partnership disputes, family law proceedings, taxation, financial reporting, compulsory acquisition, or other legal and commercial purposes.
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Common business valuation methodologies include the earnings-based approach (capitalisation of maintainable earnings or discounted cash flow), the asset-based approach (net asset value or adjusted book value), and the market approach (comparable transactions or listed company multiples). The appropriate method depends on the nature, size and purpose of the valuation.
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We value businesses across all industries including professional services, retail, hospitality, manufacturing, technology, property-related businesses, and more. Our director Andrew McGrath commenced his career at KPMG in 1986 and has extensive experience in business and intangible asset valuations.
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Yes. Where a business is disrupted or terminated as a result of compulsory acquisition, the landowner or business operator is entitled to claim for compensation. We assist companies in the assessment of compensation where a compulsory acquisition results in loss of profits or termination of the business. We provide independent business valuations in accordance with the relevant state acquisition legislation.
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Business valuation fees depend on the size, complexity and purpose of the engagement. We provide fee estimates within one business day of receiving the relevant business information.
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Standard business valuations typically take 2-3 weeks from receipt of the required financial information. Complex matters or litigation engagements are quoted individually.
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Yes. Business interests can form part of the matrimonial asset pool in family law proceedings. Our business valuations are prepared in a form suitable for use in the Federal Circuit and Family Court of Australia.
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Typically we require 3–5 years of financial statements (profit and loss, balance sheet), tax returns, management accounts, details of business assets, and information about the business’s operations, customer base, and key personnel. We will provide a tailored information checklist at the time of engagement.