Many business owners don’t tend to think about getting a formal valuation until they’re preparing to sell. But proposed capital gains tax (CGT) changes, due to commence from 1 July 2027, may mean valuations become important even when a sale is years away.i
Business owners may wish to establish the market value of relevant assets and business interests as at 1 July 2027 in order to support future CGT calculations.
Even if you have no immediate plans to sell, maintaining accurate records and supporting documentation may help achieve better tax outcomes.
What are the new CGT rules?
From 1 July 2027, the existing 50 per cent discount for capital gains available to individuals, trusts and partnerships will be replaced by cost base indexation and a 30 per cent minimum tax rate.ii
The new regime will apply to all capital gains accrued from 1 July 2027 (subject to limited exemptions).
Depending on your circumstances, relevant assets may include shares in a private company, business premises, goodwill, investment assets and other interests subject to the CGT rules. Professional advice may be required to determine which assets are affected.
Business owners need to consider what records and information will be required to substantiate the market value of relevant assets and business interests at that date. These will be needed when a capital gain is crystallised in the future.iii
Supporting information
The ATO publication Market Valuation for Tax Purposes outlines the information it requires for a valuation and this is more than a simple monetary value.
An acceptable valuation needs to be objective and independent, based on recognised valuation methodologies and be supported by credible evidence. It must include details of the asset being valued, the date it was valued and clear records to explain the basis for the market valuation.
Valuations prepared by qualified professional valuers are generally regarded as more credible by the ATO and may provide greater protection where reasonable care has been taken and accepted valuation methodologies have been applied.
Advantages of a formal valuation
Obtaining a professional valuation can help to provide greater certainty regarding potential tax liabilities and may assist with future decisions about when and how assets are ultimately sold.
Subsequent accrued capital gains are subject to the new indexation and minimum tax rate.
If you choose not to establish a market valuation for your business assets, a prescribed formula will apply, which could result in more capital gain being attributed to the post 1 July 2027 period.iv
Act now or wait?
For many business owners, obtaining a formal valuation prior to or immediately after 30 June 2027 may not be necessary, as retrospective valuations can be prepared. However, you still need to gather and retain sufficient information so a professional valuer can reconstruct and support a valuation in the future.
If you anticipate a business sale, succession event, significant transaction or ownership restructure in the near future, it may be sensible to obtain a valuation close to 1 July 2027.
Other situations where a valuation may be warranted include a business with complex valuation considerations, shareholders who want certainty regarding future tax outcomes, or if your business has the size, value or industry profile of interest to the ATO.
Preparing your business for valuation
A supportable business valuation will require the collation of financial statements and management accounts, bookkeeping files and fixed asset registers for at least three years to 30 June 2027. Budgets, forecasts, business plans, project pipelines and relevant assumptions or working papers will also be required. The quality and completeness of these records can significantly influence the strength and reliability of a future valuation.
Valuers will also need information about employee entitlements, sales breakdown by client, abnormal income and expenses, and agreements with key customers and suppliers.
Your shareholder and ownership records, acquisition documents and board papers also need to be compiled.
Obtaining a current market valuation is not just about the new CGT rules. It can also provide valuable insights into your business, help with goal setting and could make obtaining finance easier
i ATO | Reforming negative gearing and capital gains tax
ii ATO | CGT discount
iii ATO | Market valuation of assets
iv Budget 2026-27 | Tax Explainer