Australia’s changing Capital Gains Tax landscape is putting a new focus on when business value needs to be established.
From 1 July 2027, changes to the CGT framework will alter how capital gains are calculated for assets held for more than 12 months. For small business owners, the existing small business CGT concessions will continue to apply where eligibility requirements are met.
One of the important considerations under the new framework is when and how market value is established. For certain assets, taxpayers will have the choice of using a prescribed apportionment method or establishing market value as of 1 July 2027. For business owners considering the market value approach, having reliable evidence of what the business was worth at that date will become an important part of their future tax planning position.
Why does timing matter?
Trying to establish what a business was worth years later isn't always straightforward.
Business risk, industry outlook and economies change. Markets move. Businesses evolve. Comparable transactions become harder to identify. And the further removed you are from a valuation date, the more difficult it can be to accurately reconstruct a business’s records and the circumstances that existed at that point in time.
That is why early planning matters.
An independent business valuation undertaken at or around the relevant date can provide clear evidence of the business's market value and the factors supporting that conclusion.
Start the conversation early
The 1 July 2027 date may seem a long way off, but for business owners and their advisers, planning shouldn't wait until the date is approaching.
There is already discussion about the potential demand for valuation professionals as businesses prepare for the transition. For owners who may need to establish market value, leaving the process until the last minute could create unnecessary pressure.
The key is not simply having a valuation. It is having credible evidence of value at the relevant time that meets the ATO’s substantiation requirements.
For many business owners, their business represents years, if not decades, of hard work and a significant part of their family's wealth.
Understanding how the CGT changes may affect that asset, and planning well ahead of 1 July 2027, can help ensure they are in the strongest position to protect what they have built.
If you’re considering a valuation or simply want to better understand the value you’ve built, please don’t hesitate to reach out. We’re always happy to have a conversation about where you are and what comes next and how we can help protect the value you’ve spent years building.
This article provides general information only and should not be relied upon as tax or legal advice. Business owners should seek advice specific to their circumstances.
