What is a minority discount?

What a minority discount measures

A valuer usually starts by working out what the whole company, trust or partnership is worth. Multiply that figure by the percentage someone holds and you get the pro rata value of their interest. A minority discount is the gap between that pro rata figure and what a buyer would realistically pay for the parcel on its own.

The gap exists because of what the parcel does and does not let its holder do. Depending on the constitution and any shareholders agreement, a minority holder usually cannot, on their own:

• decide whether dividends or distributions are paid, or how much
• set wages, including those paid to the controlling owners
• appoint directors or change the direction of the business
• force a sale of the business or wind it up by their votes alone

Control and marketability are two different things

People often use "minority discount" to cover two separate ideas. A discount for lack of control reflects the limited say described above. A discount for lack of marketability reflects how hard it is to sell the interest: private company shares have no stock exchange, the likely buyers are often the other owners, and the constitution or an agreement may restrict who the shares can be sold to.

A controlling parcel can also be hard to sell, so we consider the two questions separately and explain each one, rather than applying a single blended figure.

When a minority discount may not apply

Whether a discount applies depends on why the valuation is needed and what the documents say.

• A shareholders agreement or constitution may set the price as a pro rata share of the whole, with no discount. Where it does, the valuer applies that basis and says so in the report.
• Where family members or related entities together hold control, the valuer looks closely at exactly what is being valued and explains the basis used.
• Where shareholders are in dispute, or a court is involved, the basis may be set by the agreement, the parties or the court. That work is a separate engagement and is quoted in writing.
• If the shareholders are separating spouses or partners, we refer the matter to our dedicated family law practice, Family Law Valuations.

For tax, market value generally means the price a willing but not anxious buyer and seller would agree for the asset actually held. The ATO's market valuation guidance says a valuation is better supported when the report specifies the interest being valued and its rights. For individuals and trusts affected by the 1 July 2027 CGT changes, the asset valued at 30 June 2027 is the shares or units they actually hold, such as a family trust’s 40% holding. Whether that is worth a straight 40% of the whole company is for the valuer to explain. An apportioning method may be an option once one is made, and your tax adviser decides what suits you.

How we deal with minority interests

Independent Business Valuation values shareholdings, trust interests and partnership interests, not only whole businesses. Each report is prepared by a suitably qualified business valuer at Valuo, who values the whole entity first, reads the constitution and any shareholders agreement, then explains in writing whether a discount applies to your interest, why, and how it was assessed.

We charge one fixed fee of $999 + GST for a full valuation report on one business or ownership interest with annual turnover under $10 million. Each additional entity or interest: $795 + GST. The fixed fee applies once we confirm the interest, purpose, structure and records fit the fixed-fee scope. Anything outside it is quoted in writing before we start. Fixed fee, confirmed in writing before we start. No hourly billing and no surprises.