Free Consultation
Book a Free Consultation
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
When a Brisbane owner sells, the relief that shrinks or removes the capital gain rests on market value. We value every entity and asset in the group as at the moment before the CGT event, while the records are current and the facts can still be shown.
Indicative valuations from A$799. Certified Summary and Detailed reports from seven business days.
The small business CGT concessions in Division 152 can cut or eliminate the gain on a business sale, but every gateway is a market value test: net assets of the whole group no more than $6 million, assets that are genuinely active and, for shares or units, the 80 per cent test. A dated valuation is the evidence.
A founder selling a civil contracting business, a Fortitude Valley creative agency or a specialist practice near the Herston health precinct usually finds that Division 152 of the Income Tax Assessment Act 1997 is the biggest single item in the tax result. Applied in full, the four concessions can take a large gain to nil. Applied on thin evidence, they can be unwound by the ATO years later, after the money has gone into a new venture, a home or the next generation.
Getting through the gate is the hard part. The aggregated turnover ceiling here is $2 million, not the $10 million that governs most other small business measures, so a business with healthy revenue often falls outside it. That leaves the maximum net asset value test: the net market value of the CGT assets held by you, your connected entities and your affiliates must not exceed $6 million just before the CGT event. A share or unit sale then adds the 80 per cent test, which needs every asset in the entity valued and sorted into active or not, including goodwill the balance sheet never shows.
Because the $6 million figure stays put while asset values rise, groups drift towards it without anyone noticing. Take an operating company, a shed at Acacia Ridge held in the family trust and leased back, and a spouse's share of a Chermside dental practice: together they can sit far closer to the limit than the financial statements imply. Put the total too high and you may forgo relief you were entitled to; put it too low and the ATO can deny the concessions outright, tax the whole gain and add shortfall interest and penalties.
Queensland land in the structure brings the state revenue side into play. Shifting property or a business between related entities ahead of a sale can attract transfer duty assessed by the Queensland Revenue Office, and a buyer taking a significant interest in a landholding company or trust may be liable for landholder duty, which tends to flow through to the price. We value the business, its goodwill and the property in the group and classify each asset; your tax adviser applies Division 152 to those figures and relies on our report if the ATO asks.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Division 152 sets out four concessions that apply in a fixed sequence once the basic conditions are met. First comes the 15-year exemption, which disregards the whole gain where the asset has been held continuously for 15 years and the owner is 55 or over and retiring, or is permanently incapacitated. Where that is not available, the 50 per cent active asset reduction applies after the general discount, the retirement exemption can shelter gains up to a $500,000 lifetime limit, and the rollover defers what remains while a replacement active asset is acquired.
Add up the market value of the CGT assets of the taxpayer, any connected entity (broadly, one controlled at 40 per cent or more) and any affiliate, then subtract the liabilities that relate to them, such as leave provisions, income received in advance and tax. Leave out superannuation, personal use assets and the main residence. Measure it all just before the CGT event, not at balance date or settlement.
A CGT event must produce a capital gain, and the taxpayer must satisfy the $2 million aggregated turnover test, the $6 million net asset test, or one of the variations for partners and for assets held passively and used by a related business. The asset itself must also pass the active asset test. Miss any step and all four concessions fall away together.
Active assets, together with cash and financial instruments inherently connected with the business, must make up at least 80 per cent of the market value of everything the entity holds. The seller must also be a CGT concession stakeholder, which requires a significant individual with a participation percentage of at least 20 per cent, and where an entity sits in between, stakeholders must hold at least 90 per cent of it.
It must have been used in the business for at least half the time it was owned, or for at least 7.5 years where ownership exceeded 15 years. Property whose main use is earning rent is excluded unless the tenant is a connected entity or affiliate carrying on its business there, so mixed-use buildings, storage sites and serviced suites need careful facts.
Where a family trust owns the shares, each person's participation percentage depends on the distributions the trust actually made in the income year concerned. A year with no distribution, or one where small amounts went to many beneficiaries, can leave the trust without a significant individual, and no valuation can repair that. Ask your tax adviser to look at the distribution history well before any heads of agreement are signed.
The ATO reads market value in Division 152 the same way it does across the tax law: the price an informed, willing but not anxious buyer and seller would settle on at arm's length. Historical cost and book equity rarely meet that test. A Rocklea factory still carried at its purchase price from the 2000s understates the group, while a company shown at the net assets in its accounts omits goodwill entirely.
For the operating business, the income approach leads. Owner remuneration, rent paid to related parties and one-off items are normalised, maintainable earnings are capitalised, and the result is cross-checked against comparable transactions under the market approach. That earnings-based figure is how goodwill enters the 80 per cent test, and it is frequently what turns an apparent fail on book values into a clear pass. Land, buildings, plant and surplus assets are valued under the asset approach, drawing on a registered property valuer's evidence where the amounts matter.
The deliverable is a schedule, not one number. It lists each entity in the group, each asset it owns, the market value at the test date, any related liability and whether the asset is active or excluded, with the facts that support the classification. Your tax adviser then applies the aggregation and exclusion rules to the schedule and reaches the conclusion.
Most failed claims trace back to missing facts or the wrong date rather than a disputed point of law, and almost all of them could have been fixed before the sale was signed.
An ATO review of a Division 152 claim can arrive years after settlement, by which time the report has to stand on its own. Where the group is comfortably inside the limits, a Summary report generally carries the claim. Where the margin under $6 million is thin, the 80 per cent test is finely balanced or the ATO is already asking questions, the reasoning needs to be set out fully enough for another expert to test it.
Each report states the valuation date, the standard of value adopted and the material we relied on, then works through the group entity by entity and asset by asset. Goodwill comes from a normalisation schedule and a capitalisation rate, both explained; every property figure is linked to identified sales; and each active or excluded label carries the facts that support it. A closing reconciliation explains in plain terms why one approach was given more weight than another.
The certified valuer who signs the report stands behind it: with your adviser while the sale is planned, with the ATO through a review or objection, and before the Administrative Review Tribunal or the Federal Court of Australia if it goes that far. If the sale itself later ends up in a dispute between the parties before the Supreme Court of Queensland, the work has been prepared with the expert evidence rules in Chapter 11 Part 5 of the Uniform Civil Procedure Rules 1999 (Qld) in mind. Where the group holds Queensland land, the values we adopt match anything given to the Queensland Revenue Office, so the evidence before one revenue authority never contradicts the other.
Suppose the ATO writes to you four years after settlement. Could you hand over a signed opinion, asset by asset, of what the group was worth the day before the contract? If the honest answer is no, the time to commission it is before you sign.
Talk your situation through with a certified valuer before you commit to anything, at no cost.