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.
We respond to every enquiry within one business day.
Tell us what’s being valued.
Give us the entity and the date of valuation. We’ll come back with a fixed fee, a timeframe, and the information we’ll need from you.
Your enquiry is read by a valuer, not a call centre. If a valuation isn’t the right instrument for your situation, we’ll tell you before you engage us.
WHY IT MATTERS
The number is rarely challenged at the time. It is challenged later.
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.
HOW WE WORK
Built to be read by a reviewer, not just by you.
Prepared to ATO requirements
Reports set out the methodology, evidence and reasoning relied upon, in the form the ATO’s market valuation guidance calls for.
Current or retrospective
Valuations as at today, or as at a historical date where the CGT event occurred years ago and was never documented.
Independent of the transaction
We do not broker, advise on, or take a fee contingent on the outcome of any sale, restructure or dispute we value.
Reasoned, not asserted
Every method selection, adjustment and discount is explained. A conclusion without reasoning is an opinion, not a valuation.
Fixed fee, agreed first
Scope, fee and timeframe confirmed in writing before work begins. No variation unless the scope changes and you approve it.
Supported if it is queried
We retain the working papers and evidence file, and the valuer who signed the report is available to explain and support it.
WHEN IT’S REQUIRED
Circumstances that call for a business valuation.
Some are obvious at the time. Others are only identified by an adviser reading the legislation carefully — or by the ATO reading the return.
Sale or partial sale of a business
Disposal of the enterprise, of shares in the operating company, or of units in a trust — including staged sales and earn-outs where value must be fixed at a point in time.
Transfers to related parties
Where parties are not dealing at arm’s length, the market value substitution rule (s116-30) treats the transaction as occurring at market value, whatever was actually paid.
Small business CGT concessions
Eligibility under Division 152 can turn on the maximum net asset value test and the active asset test. Both need a defensible market value at the time of the CGT event.
Restructures and rollovers
Moving a business between entities, admitting a new entity to the group, or applying a small business restructure rollover — the value transferred must be established.
Buy-ins, buy-outs and equity issues
Incoming partners, departing shareholders, equity to key people. Minority position and marketability materially affect a parcel’s value and must be reasoned, not assumed.
Deceased estates and succession
Transmission of shares, units or business interests to beneficiaries, where value must be established at the date of death or the date of transfer.
Pre-CGT interests
Where an interest is claimed to be pre-CGT, the position can depend on continuity of majority underlying interests — and on value at the relevant testing dates.
Employee equity and incentive plans
Shares or options issued in an unlisted company require a market value at the grant or acquisition date, prepared on a basis that can be explained.
Self-managed superannuation funds
Where a fund acquires, disposes of or holds an interest in a private company or trust, market value must rest on objective and supportable evidence.
THE EVIDENCE STANDARD
The ATO does not assess a figure. It assesses the process behind it.
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 tends not to hold
- An earnings multiple applied without explaining where the multiple came from, or why it fits this business.
- An internal management estimate prepared for another purpose, later repurposed as tax evidence.
- A price negotiated between related parties, offered as proof of market value.
- A figure with no stated date of valuation, no basis of value, and no assumptions disclosed.
- A valuation by a party with an interest in the transaction, or a fee tied to its outcome.
- A one-page letter of opinion: a conclusion with no reasoning, evidence or cross-check.
What we document
- The purpose, the interest valued, the basis of value and the exact date of valuation.
- The valuer’s qualifications, experience and declaration of independence.
- Normalisation adjustments to reported earnings, each identified and explained.
- The methods considered, the method adopted, and the reasoning — with a cross-check on a second basis.
- Discounts or premiums for minority interest or marketability, with the basis for each.
- Every material assumption, the evidence relied upon, and the limiting conditions of the report.
THE DELIVERABLE
What the report contains.
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.
Instruction and scope
Who engaged us, the purpose of the valuation, the interest valued, the basis of value adopted and the date of valuation.
Credentials and independence
The valuer’s qualifications and relevant experience, with a declaration of no interest in the outcome.
Entity and business overview
Structure, ownership, operations, customer and supplier concentration, key personnel dependencies and industry context.
Financial analysis
Historical results reviewed, with normalisation for owner remuneration, related party dealings, one-off items and non-operating assets.
Methodology and selection
The approaches considered — capitalisation of future maintainable earnings, discounted cash flow, net asset backing, comparable transactions — and why the adopted approach fits.
Evidence relied upon
Comparable transaction and market evidence, industry data, and the source for every input, referenced to the date of valuation.
Adjustments to the interest
Where a partial interest is valued, the treatment of control, minority position and marketability, with the basis for each adjustment stated.
Cross-check and reconciliation
A secondary method applied as a sense check, with any divergence explained rather than averaged away.
Assumptions and limiting conditions
Every assumption made explicit, so the reader knows precisely what the conclusion depends on.
Signed conclusion of value
The assessed market value at the relevant date, signed by the valuer responsible for it.
RETROSPECTIVE VALUATIONS
The event was years ago. The valuation still has to be as at that date.
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.
HOW IT WORKS
From enquiry to signed report.
Scope and fee
A short conversation with a valuer to establish the interest, the correct date and the CGT event involved. You receive a fixed fee, a timeframe and a specific list of what we need. If a valuation isn’t the right instrument, we say so here.
Analysis
Financial review and normalisation, market and comparable evidence, method selection and cross-check. We come back to you once with questions rather than repeatedly.
Signed report
The full report issued to you or your adviser, with the valuer available to discuss the reasoning — and to respond if the position is later reviewed.
Before You Engage Us
Questions we’re asked.
Can our accountant simply prepare the valuation?
Sometimes, depending on the purpose and the accountant’s expertise. The difficulty is independence: where the same practice advises on the transaction and values the asset that determines the tax outcome, the valuation carries less weight on review. An independent valuation removes that argument before it is made.
What date should the valuation be as at?
The date of the CGT event — generally the date of the contract, or the date of the change in ownership where there is no contract. Where a concession or eligibility test is involved a different date may apply. Tell us the circumstances and we will confirm the date before quoting.
Can you value as at a date several years ago?
Yes. Retrospective valuations are a routine part of this work. What we need is the financial and corporate information that existed at that date. Where records are incomplete, we will tell you what can and cannot be supported before you commit to the engagement.
Will the ATO accept the report?
No valuer can guarantee how a specific matter will be assessed, and we will not suggest otherwise. What we can do is prepare the valuation so that the methodology, evidence and reasoning are fully set out in the form the ATO’s guidance calls for — which is the basis on which a market valuation is assessed.
What happens if the valuation is queried?
The valuer who signed the report responds. We retain the working papers and the evidence file, and we can explain and support the reasoning to your adviser or to the ATO. That capability is part of the reason the report is written the way it is.
What information will you need from us?
Generally: financial statements and tax returns for several years to the date of valuation, management accounts, the corporate structure and ownership register, material contracts and leases, and details of any related party arrangements. You will receive a specific list with the fee proposal rather than a generic checklist.
What does it cost?
Fees are fixed and quoted upfront, and depend on the size and complexity of the entity, the number of interests valued, and whether the date is current or historical. We will not begin work before the fee is agreed in writing.
Do you value businesses in our industry?
We value operating businesses across most sectors, with particular depth in childcare, service stations, quarrying and mining, and schools. If the sector is one where we would not add value, we will tell you and, where we can, point you to someone who will.
Establish the position while the evidence still exists.
Tell us the interest, the date and the CGT event behind it. We’ll confirm what the valuation can and cannot support, with a fixed fee and a timeframe — before you commit to anything.
Not sure whether your matter needs a formal valuation at all? That’s exactly the kind of question we’re happy to answer before you engage us.