Understanding the Upcoming Changes to Capital Gains Tax and Why a Business Valuation May Be Important

From 1 July 2027, the current 50% CGT discount is to be replaced with a new regime that distinguishes between gains accrued before and after that date. Under the legislated changes, gains accumulated up to 30 June 2027 will generally retain access to the existing 50% CGT discount, while future growth in value will be subject to the new indexation-based system.

For business owners, this means that understanding the value of your business as at 30 June 2027 may become increasingly important from a tax planning perspective. Establishing a supportable market value at that date can assist in identifying the portion of any future capital gain that may qualify for the existing 50% discount.

Illustrative Example

Wendy purchased her architectural practice in 2012 for $1 million. Through strong performance and growth, the business is worth $6 million at 30 June 2027.

The unrealised capital gain at that date is $5 million. Under the current rules, the 50% CGT discount would reduce this gain to $2.5 million (before considering any other available concessions).

The value of the business at 30 June 2027 effectively becomes a reference point, and maximises the tax benefit of the 50% discount. Any future increase in value after that date would be subject to the new post-2027 CGT rules.

Why Consider a Business Valuation?

Determining the market value of a private business can be highly subjective. A professionally prepared valuation can provide a well-supported and defensible basis for establishing value, helping to reduce uncertainty, and supporting your position should it ever be reviewed by the ATO.

At StewartBrown, our Partner Ray Itaoui is a CA Certified Business Valuation Specialist and can assist with independent business valuations across a wide range of industries.

While a valuation may assist with future tax planning, business owners often find significant value in obtaining an independent valuation for a range of other purposes, including:

  • Related party transactions and business restructures
  • Succession and exit planning
  • Business sale or acquisition planning
  • Bank finance and capital raising requirements
  • Estate planning and family law matters
  • Employee share schemes and equity incentive arrangements

If you would like to discuss how a valuation could assist your business or would like an obligation-free estimate of the likely cost, please contact us.