Business succession valuation for families, partners and managers

Why succession needs a number everyone can accept

When a business is sold to a stranger, the market tests the price. In a succession the buyer is an insider and the seller often wants to be generous. That works until a sibling, lender, executor or the tax law asks what the business was really worth.

Where the parties do not deal at arm's length, as is common in families, the tax law can generally treat a transfer as made at market value, whatever price was paid. Your tax adviser decides how that applies, and will usually want a supportable value to work from.

Independent Business Valuation prepares that value. The report does not decide who gets what. It tells the family and its advisers what there is to divide.

Five succession situations, and what each needs

Family succession

Handing over to the next generation raises three questions: what the business is worth, what the incoming family member pays, if anything, and how that is balanced against children outside the business. The last two cannot be settled fairly until the first is answered.

Management buyouts

The buyers in a management buyout often know the business better than the owner, including which customers are loyal and which contracts are shaky. An independent value gives the owner a defensible price and gives the managers, and any lender, a figure they can test. Terms such as vendor finance or an earn-out are for the parties and their lawyers.

Staged buy-ins

A key employee or junior partner buys in over several years, say 20% now and 20% in three years. Each stage normally needs a value at its own date. Check whether your shareholders agreement prices a parcel as a straight share of the whole or as a minority interest, which can be worth less per share. Our article on minority interests explains why.

Estate planning and wills

Executors and estate lawyers often need evidence of what a business or parcel of shares is worth: today, to test whether a will still does what the owner intends, or at the date of death. A dated, reasoned report gives beneficiaries something to test rather than argue over.

Buy-sell agreements and insurance funding

Co-owners often sign a buy-sell agreement so that if one dies or becomes permanently disabled, the others can buy that share, usually funded by insurance. The price is typically a value updated each year, a formula, or an independent valuation at the time. The common failure is a number that stopped moving.

We can value the business when the agreement is signed, each year at an agreed date, or at a trigger event. The agreement, the policy and their tax treatment are for your lawyer, insurance adviser and tax adviser.

What a valuer looks at when the owner steps back

Succession changes the business being valued: what would it earn without the person who built it? These points most often move the value:

• Owner dependence. If key customers, supplier terms or licences sit with the outgoing owner personally, a buyer pays less for goodwill that may walk out the door. A handover period and a capable second-in-charge reduce that risk.
• The owner's real cost. Owners often pay themselves too little, or too much. The valuer uses the cost of employing someone to do the job.
• Family on the payroll. Family wages above or below market are adjusted to what those roles would cost at arm's length.
• Related-party rent. Where the family owns the premises, the rent is tested against market rent.
• Control or a minority. All the shares, a 20% parcel and a unit holding can carry different values per share or unit. The interest transferred decides the answer.

A valuation a year or two before the handover shows where value depends on one person, while there is still time to fix it.

Planning a family transfer around 30 June 2027

From 1 July 2027, the 50% CGT discount for Australian resident individuals and trusts (including individuals' shares of partnership gains) is generally replaced by cost base indexation for gains that build up from that date, and resident individuals pay at least 30% tax on those gains, with some exceptions. To split the periods, Australian resident individuals, and trusts with at least one eligible beneficiary, are automatically treated as selling relevant assets just before 1 July 2027 and buying them back, by default at market value. The law also lets the Government set an apportioning method instead, but that method is still a draft (released for consultation in August 2026, not yet final). The rule does not apply to a company's own post-1985 assets, although shares held by a person or a trust can be caught.

For a family planning a handover, that raises timing questions. Those are decisions for your tax adviser and lawyer, and we do not give that advice. What we can tell you is what each path may ask of the valuation:

• A transfer to family before 1 July 2027 will generally be measured against market value at the transfer date.
• A transfer after that date may involve two amounts: market value at the transfer date, and a 30 June 2027 amount, which by default is market value just before 1 July 2027 (a draft apportioning method, not yet final, may in future be an alternative).
• If no transfer is planned for years, keeping good records around 30 June 2027 keeps a later valuation possible.

The small business CGT concessions continue, and the maximum net asset value test several of them rely on is measured using market values. Our article on those concessions explains where a valuation fits.

Where two dates are needed, one engagement can cover both. A valuation as at 30 June 2027 is prepared after that date, once your records to 30 June 2027 are available. You can book your place now.

Fees, timing and what to have ready

Each additional valuation date, such as a later buy-in stage, is $495 + GST, and each additional entity or interest is $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. Delivery time starts once payment and all required information have been received, and pauses while we wait for answers to our questions or your signed representation letter.

1. 01Tell us about the handoverWho is passing what to whom, the structure, the interest and the dates that matter, plus what any buy-sell or shareholders agreement says about price.
2. 02Securely provide financial informationUsually three years of financial statements, current management accounts, the shareholders agreement or trust deed, and any premises lease. Documents come only through the secure upload link on your matter, never by email.
3. 03Receive your valuation reportThe report is prepared and signed by a suitably qualified business valuer at Valuation Group. Before the final report, you sign a representation letter confirming the information you supplied.