Valuation or apportionment: two ways to work out the 30 June 2027 amount

What the 30 June 2027 amount is

From 1 July 2027, for Australian resident individuals and trusts, the 50% CGT discount is generally replaced by cost base indexation, and resident individuals generally also face a 30% minimum tax on capital gains. The ATO describes these measures as law. They target gains that build up from 1 July 2027, so the law needs a way to split a gain that straddles the line.

It uses a notional sale. If you are an Australian resident individual, or a trust, holding a business interest through 30 June 2027, you are generally treated as selling it just before 1 July 2027 and buying it back straight afterwards. The Act's notes place the sale on 30 June 2027. Growth up to then generally keeps access to the 50% discount when you eventually sell, where it would otherwise apply. Growth after falls under the new rules.

The law gives two ways to fix the figure for that notional sale: market value just before 1 July 2027, or an amount worked out under an apportionment method the Minister sets by legislative instrument (the Act says apportioning method). That method is still a draft, as route two explains. For a business, shares, units or a partnership interest, market value usually means a valuation.

Route one: a valuation as at 30 June 2027

A valuation asks what a willing buyer and a willing seller, both reasonably informed and neither forced to deal, would have agreed for the business or your interest in it at the close of 30 June 2027. It answers from evidence of that date: the year's earnings, customers, contracts, owner dependence and comparable sales.

Because it measures the business at the date, it captures whatever actually happened before then: a growth spurt, a flat patch, a big contract, a lost customer.

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. It can also be prepared years later as a retrospective valuation, but that is harder: the records and context behind the numbers fade. Our article on preparing your records for a 30 June 2027 valuation covers what to keep.

Route two: the apportionment method

The draft method needs three facts: what you originally paid, what you eventually sell for, and the dates. It assumes the asset grew at one steady compounding rate every day from purchase to sale, then reads off where that curve sat at the end of 30 June 2027. Picture a smooth line between two dots, the price you paid and the price you got, measured at the date. No one looks at the business itself.

Under the draft, the method covers real property and assets without a readily ascertainable market value. Listed shares are out. The draft explanatory material says shares in a private or closely held company may not always have a readily ascertainable value. Whether yours does is for your tax adviser.

The method needs the sale price, so no one can tell in 2027 what it will produce. The draft explanatory material says the ATO is preparing tools to help.

Where the two answers part ways

If a business grew steadily, the smooth line and a valuation may land close together. But private businesses rarely grow in a straight line. They step up when a big contract lands, stall when a key person leaves, and jump when a second site opens. Where the real path and the smooth line diverge, the two routes give different 30 June 2027 amounts, and a different split between the old rules and the new.

Once the method is finalised, the law lets the taxpayer choose between it and market value for assets it covers, so neither figure is wrong in tax terms. The two periods are taxed under different rules, so the split can change the tax on the eventual sale, and your tax adviser works out which route suits you. A valuation adds a figure that reflects the business as it actually stood, backed by evidence from the time.

When a valuation may be more useful

A valuation tends to earn its keep where the smooth line is least likely to match reality. That may include:

• Uneven growth: most of the value was built early, or the business changed sharply before 2027.
• Recent growth: a business bought or started cheaply that grew quickly in the few years before 30 June 2027.
• Lumpy events near the date: a major contract won or lost, a new site, a key person leaving, a restructure.
• A sale, transfer or restructure likely within a few years, or a larger interest where the gap could be material.

A valuation does not decide the tax outcome. It gives you and your adviser a supportable market value to set beside the formula when the time comes.

When apportionment may be simpler

The method exists to spare people the cost and effort of a valuation where it adds little. It may be the simpler route where:

• The business has grown fairly steadily over a long holding period.
• The amount at stake is small compared with the cost of a valuation.
• The asset was bought at arm's length for a meaningful price, so the line starts from a sound point.
• The records needed to support a value at 30 June 2027 do not exist and cannot be rebuilt.

You do not have to choose now

Under the Act, the choice between market value and the apportionment method need not be made until you lodge your tax return for the income year in which you sell or otherwise dispose of the asset. That could be 2030, or 2045.

That helps. A valuation prepared after 30 June 2027 does not lock you in: if the method later gives a figure your adviser prefers, the law generally still lets you choose it. The reverse is harder. Skip the valuation, find the formula a poor fit, and a valuation as at 30 June 2027 can still be prepared, but only from whatever records survived.

So the question today is not 'valuation or apportionment?' but 'do I want the market value option well supported when the time comes?' For some owners the answer is no. For others, keeping the evidence, or having the valuation done while the records are fresh, keeps the choice a real one.

Who decides, and where we fit

Your tax adviser decides whether the rules apply to you, which assets they reach, and which route to use. We value businesses and business interests. We do not give tax advice and we do not calculate your tax.

If your adviser says a market value at 30 June 2027 would help, Independent Business Valuation can value the business, shares, units or partnership interest at that date. 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. Larger businesses and groups: Quoted in writing. 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.