Business Valuation Australia: The 2027 Tax Deadline

Ask most business owners what their company is worth and you get a shrug, then a number from a mate at the pub. They’ll find out the real figure on the day they sell, and not a minute before. That logic held for a long time. From 1 July 2027 it falls apart, because a change to capital gains tax turns the value of your business on one particular day into a number that sets your tax bill, whether you sell that year, in a decade, or never.

The day is 30 June 2027. The figure is what your business was worth that morning. Get it valued properly and you hold a piece of tax evidence that follows you until you sell. Leave it, and the government picks a number for you, using a formula that assumes your business grew in a smooth line. Almost none of them do. What follows is why that date matters, how the value you can prove decides what you keep, and what a valuation has to look like before the ATO will take it seriously.

Why your business valuation is now a tax deadline

Until now, selling a business you had held for more than a year meant a 50% capital gains tax discount, and if you weren’t selling, what your business was worth stayed your own affair. Both of those are changing. Under the enacted Treasury Laws Amendment (Tax Reform No. 1) Act 2026, the operative CGT changes take effect on 1 July 2027. This is already law.

From that date, the general 50% CGT discount for individuals, trusts and individual partners in partnerships is replaced by cost-base indexation, plus a 30% minimum tax on relevant real capital gains. If you’re sitting on a business or any other CGT asset that has grown in value, that changes how much of the gain you actually keep.

Losing the discount doesn’t strip it off everything you’ve already built. Gains that accrued before 1 July 2027 keep the existing 50% discount under transitional rules, even if you sell the asset years down the track. Your business effectively splits into two tax regimes at the changeover, and where the line falls decides how much tax you eventually pay. You’re treated as resetting the asset’s value at that date, which fixes the split. The tax itself still waits until you actually sell, so nothing is payable just because the calendar ticks over.

Two things trip owners up here. The first is the worry that you have to sell before 30 June 2027 to lock in the old discount. You don’t. The discount on everything up to that date is preserved whether you sell or hold, so selling a good business in a hurry, purely for tax, is usually an expensive mistake. The second is who the change actually touches. It applies to assets held by individuals and trusts, including the shares you hold in your own company. Assets the company owns in its own name aren’t caught the same way. If your business sits in a family trust, or you hold the shares personally, you’re squarely inside it.

So the value of your business on one morning in mid-2027 is now a tax input. The owner who can prove that number is in a far stronger position than the one trying to reconstruct it years afterwards from memory and a shoebox of receipts.

How your value on 30 June 2027 splits your tax bill

For 30 June 2027 you get a choice. You can rely on the government’s apportioning formula, which needs no valuation and assumes your business grew at a steady rate every year since you bought it. Or you can get a supported market valuation that shows how it actually grew. For a business that climbed fast early and flattened out, that difference is enormous, because the formula parks far more of your gain on the new, fully taxed side of the line.

Take a simple case, and treat every figure as illustrative rather than advice for your own situation. You buy a business for about $1 million in 2022 and sell it for about $10 million in 2030. The gain is roughly $9 million either way. What moves is where that gain sits at the changeover.

Run the numbers on that case. Under the formula, steady growth values the business at about $4.2 million at 30 June 2027, so only around $3.2 million of gain keeps the 50% discount and the rest is taxed in full. A supported valuation that reflects the real, front-loaded growth puts the value closer to $9 million, so about $8 million of the gain keeps the discount. For an individual at the top rate, ignoring indexation, that’s roughly $1.12 million less tax, if the higher value can be evidenced. Move the line, move the tax. A defensible valuation is how you move it with evidence instead of hope.

There’s good news sitting alongside all this. The Division 152 small business CGT concessions, including the active asset reduction and the 15-year exemption, remain available after the reform, and in some respects broaden. The detail is worth checking against current ATO guidance for your situation, so see the small business CGT concessions and whether your active assets qualify before you lean on either.

Do you actually need a valuation?

Not every owner does, and it’s fair to ask before you spend money on one. The test is blunt: do you hold assets with no quoted market price? A parcel of listed shares values itself every second the market is open. Private company shares and business goodwill don’t. Someone has to work out what they’re worth, and from 30 June 2027 that someone is either you, with a proper valuation, or the ATO, with its formula. A valuation also gives you a fair figure to work from if you want to exit a partnership agreement or resolve a dispute between 50/50 shareholders.

If you can’t yet answer who owns the business, how your growth happened, how much of your income repeats, or who your biggest customers are, that’s your starting point rather than a reason to put it off.

What makes a valuation the ATO will accept

If the whole point is to fix a number the ATO might one day test, the valuation has to be the kind that holds up. A defensible valuation is a formal, reasoned document a qualified accountant puts their name to, prepared under the professional standard APES 225. It takes three years of accounts, strips them back to EBITDA, normalises them, applies a defensible multiple, cross-checks the result against net assets, and expresses the answer as a range. That’s what separates a real valuation from a guess.

Now put the online calculator next to that. Every accounting firm has one, Lawpath included, and they’re fine for getting your ideas moving. They give an indication and nothing more. APES 225 recognises three levels of engagement, from a calculation engagement through to a full valuation engagement, and an online calculator isn’t even the first rung. Nobody agreed any terms, nobody was bound by a standard, and nobody signed. Tim Quinn, who leads Lawpath Tax & Advisory and has prepared business valuations for around fifteen years, puts the test plainly. If the ATO asks how you reached your number and the honest answer is “I ran it through an app on a website,” that won’t cut the mustard. A valuation prepared properly under APES 225 is very hard to overturn. A screenshot of a calculator isn’t.

It helps to be honest about what a valuation can promise, because that shapes how you defend it. “There is only one true fixed point valuation that is definitely correct,” Tim says. “It is when a willing buyer meets a willing seller.” In fifteen years he has never seen that perfect moment, because there’s always a gap in what each side knows. So a valuation approximates the price that clean deal would produce, which is why the answer comes as a range. “Opinion not a measurement” is how he sums it up, and a documented, defensible opinion is exactly what survives an ATO question when a single confident figure wouldn’t.

What actually sets the number

Most small business valuations lean on one method: the earnings multiple. You work out the profit the business can reliably expect to make year after year, then multiply it by the number of years a buyer in your sector would pay for up front. A business with maintainable earnings of $200,000, in a sector where buyers pay for about four years, lands near $800,000. That’s the back of the envelope. The real work happens before you reach the earnings figure, and in the multiple you choose.

A real one shows how much is at stake in those two steps. Take an anonymised welding and fabrication business, valued on three years of accounts.

Look at what did the damage. Two customers accounted for about 40% of income, with nothing in writing to hold them. On its own, that single judgment, cutting the multiple from 4.5 to 3.5, took roughly $1.5 million off the value. Not the earnings, not the accounts, just the risk a buyer prices in when too much of your income could walk out the door. Fix that before a valuer sees it and you’re protecting seven figures.

The earnings figure moves just as much during normalisation, the step where a valuer rebuilds your profit to show what a buyer would actually inherit. If you’ve paid yourself a token wage for years, your profit looks better than it is, so a market salary gets added back as a cost and the number drops. Pay yourself through dividends, run personal costs through the business, keep family on the payroll above market rates, or claim an instant asset write-off as if it were an operating expense, and each one gets adjusted. The ones that lift your number are the real levers worth pulling before 30 June 2027:

• Strong, consistent EBITDA. Reliable profit across three years beats the same average with wild swings, because steady earnings lower a buyer’s risk.
• Growth you can explain. Steady growth helps most when you can point to why it happened and why it continues. An overstated hockey-stick forecast does the opposite.
• Recurring revenue and low churn. Subscriptions, retainers and contracts that renew are especially valuable. Show them separately in your accounts so a buyer can see how much income repeats without a new sale.
• A business that runs without you. Documented systems and a team raise the multiple. Heavy reliance on the owner lowers it.
• A spread of customers. Broaden the base, or lock big clients into multi-year contracts, so no single loss would gut your earnings.

Tim rates the owner-dependence point higher now than he did early in his career. “A business that runs without you is more valuable,” he says. His test is a blunt one: if you were hit by a bus tomorrow, could someone else pick up the business and run it? Many owners are too busy running the thing to write down how it works, so the knowledge lives in their head, a buyer can’t extract it, and they won’t pay full price for it. Fixing that lifts your sale price later and your defensible value at 30 June 2027.

What to do before 30 June 2027

The valuation is dated 30 June 2027, but the work that lifts your number starts now. You don’t have to sell by then, and the valuation itself can be prepared soon after the date as long as it reflects the value on the day. What you need is to be ready, because a messy set of books makes for a slow, expensive valuation and weak evidence.

Between now and the end of 2026, get a current estimate so you know where you stand, then clean up your books and structure and work on the two things that move the multiple most: recurring revenue and customer concentration. From January to June 2027, book your valuer early, because they’ll be stretched once the date passes, gather your documents, and decide whether a full valuation or the government formula fits your situation. From 30 June 2027, your valuer prepares the report at or soon after the date, and you keep it on file for the day you actually sell.

Most of the documents already sit in your accounting software. You’ll need three years of profit and loss statements and balance sheets, your current year-to-date figures, and your tax returns and lodgement status, most of which export straight from Xero. The rest is about how the business runs: your ownership and entity structure, your customer list and revenue split, key contracts and leases, and who does what, including your own role. The single most useful thing you can do first is get your lodgements up to date, because late returns make every adjustment harder to defend. Our business tax compliance service exists for exactly that, and if a sale is on the horizon, our guide to how to sell your business walks through what buyers look for.

Frequently asked questions

Do I need a business valuation if I’m not selling?

If you plan to hold your business past 1 July 2027, it’s worth getting one. A defensible value at 30 June 2027 fixes how your future capital gain is split between the old 50% discount regime and the new one. For many owners it’s more useful as a holder than as a seller.

Do I have to sell before 30 June 2027 to keep the 50% discount?

No. The 50% discount on gains that accrued up to 30 June 2027 is preserved whether you sell or keep holding, under transitional rules. Rushing a sale purely to beat the date usually costs you more than it saves, so plan the tax rather than panic over it.

Does the 50% CGT discount disappear completely on 1 July 2027?

No. Gains that accrued before 1 July 2027 keep the existing 50% discount under transitional rules, even if you sell later. From that date the discount is replaced by cost-base indexation plus a 30% minimum tax on relevant real gains, so only the post-change portion of your gain is affected.

Are the small business CGT concessions still available after the reform?

Yes. The Division 152 small business CGT concessions, including the active asset reduction and the 15-year exemption, remain in place and in some respects broaden. Eligibility still depends on your circumstances, so confirm it against current ATO guidance or with your adviser before relying on it.

How much does a defensible business valuation cost?

Expect to pay a few thousand dollars for a proper valuation prepared under APES 225. If someone offers to value your business for a couple of hundred dollars, walk away. A defensible valuation involves real analysis and documentation, and the cheap version won’t hold up if the ATO asks questions.

Can I use an online business valuation calculator?

As a starting point, yes. As something to rely on with the ATO, no. An online calculator gives an indication only and isn’t even a calculation engagement under APES 225. If you need a value you can defend, for a sale or for the 2027 changeover, get a valuation prepared by a qualified accountant.

How do I increase my business valuation?

Make your earnings consistent, grow in a way you can explain, build recurring revenue with low churn, and document your processes so the business runs without you. Spreading income across more customers helps too. Read your valuation report and fix whatever is dragging the multiple down.

Get your number before the number matters

If you’ve never had your business valued, you’re in good company. You’re not behind. There’s time to get your books in order and your evidence lined up well before the date counts, and every hour of it also makes the business easier to run and easier to sell.

A proper valuation from Lawpath Tax & Advisory is a full APES 225 engagement, signed by a qualified accountant: a written report with the methods and the cross-check, the workpaper that traces every number back to your accounts, and the scenarios that show what could lift your value before the date. The one thing worth doing now is getting your lodgements and records clean, so that report is quick to produce when you want it. Lawpath’s tax and accounting team handles both in one place, with an ongoing tax and accounting advice plan that keeps you ready rather than scrambling.

Find out what your business is worth, with evidence behind the number, before the day that number starts to count.