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Selling a Norwood practice, a Wingfield fabrication shop or a share in a family winery in the Barossa? The 15-year exemption, the 50 per cent reduction, the retirement exemption and the rollover all depend on market values. We value each entity and asset in your group as at the moment before the CGT event, while the records and the people who know the facts are still at hand.
Indicative valuations from A$799. Certified Summary and Detailed reports from seven business days.
To use the small business CGT concessions in Division 152, a seller has to show that the group's net assets were no more than $6 million, that the asset sold was active and, for shares or units, that the 80 per cent test was met. Each test is measured at market value, so a dated valuation is the proof.
South Australia has a large group of owners who built their businesses in the 1980s and 1990s and are now planning to step back: the engineering supplier in Salisbury or Lonsdale, the accounting firm in Kent Town, the physiotherapy clinic in Unley, the second-generation grape grower in McLaren Vale. For most of them the four concessions in Division 152 of the Income Tax Assessment Act 1997 are worth more than any other line in the tax calculation, and they can reduce a substantial gain to nothing. The ATO can also review the claim long after the proceeds have been reinvested or handed to the family, so the evidence has to outlast the sale.
Entry is where claims succeed or fail. Division 152 still uses a $2 million aggregated turnover limit, while most other small business measures moved to $10 million, so an established business with steady sales is often too large on turnover alone. The alternative is the maximum net asset value test, which caps the net market value of the CGT assets owned by you, your connected entities and your affiliates at $6 million, measured just before the CGT event. If what you are selling is shares or units, the 80 per cent test follows, and it needs every asset in the company or trust valued and classed as active or not, including internally generated goodwill that never appears in the accounts.
Long ownership is exactly what pushes groups towards the ceiling. The $6 million limit is fixed in dollars while property and goodwill grow, so a trading company, a Regency Park workshop owned by the family trust and leased back, and a spouse's interest in a Burnside medical practice can add up to far more than the balance sheets suggest. Overstate the total and you may give up relief the law allowed; understate it and the ATO can refuse the concessions entirely, tax the full gain and charge shortfall interest and penalties on top.
South Australian land brings RevenueSA into the picture as well. Moving property or a business into a different entity before a sale can have stamp duty consequences under the Stamp Duties Act 1923 (SA), and a buyer acquiring an entity that owns land may raise duty questions of its own when it prices the deal. We value the business, its goodwill and the property held across the group and record how each asset is used; your tax adviser applies Division 152 to those values and points to our report if the ATO asks how they were reached.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Once the basic conditions are satisfied, Division 152 offers four concessions in a set order. The 15-year exemption comes first and removes the entire gain where the asset was held continuously for 15 years and the owner is aged 55 or more and retiring, or is permanently incapacitated. If that exemption is not available, the 50 per cent active asset reduction is applied after the general discount, the retirement exemption can cover gains up to a lifetime limit of $500,000, and the rollover defers any remainder while a replacement active asset is bought.
Total the market value of the CGT assets owned by the taxpayer, by every connected entity (broadly, one controlled at 40 per cent or more) and by every affiliate. Deduct liabilities that relate to those assets, such as employee leave provisions, income received in advance and tax payable. Superannuation, personal use assets and the main residence are left out. The measurement point is just before the CGT event, not the last balance date or settlement.
There must be a capital gain from a CGT event, and the taxpayer must pass either the $2 million aggregated turnover test or the $6 million net asset test, or qualify under the variations for partners and for passively held assets used in a related party's business. The asset must pass the active asset test as well. If any one of these fails, none of the four concessions is available.
The entity's active assets, plus cash and financial instruments that are inherently connected with its business, must account for at least 80 per cent of the market value of all its assets. The seller must also be a CGT concession stakeholder, which needs a significant individual holding a participation percentage of 20 per cent or more, and where another entity sits between the seller and the business, stakeholders must together hold at least 90 per cent of it.
The asset must have been used in carrying on a business for at least half of the ownership period, or for at least 7.5 years if it was owned for more than 15 years. An asset whose main use is to derive rent is excluded, unless the tenant is a connected entity or affiliate running its own business from it, so premises that are partly let, storage facilities and serviced offices need the facts recorded carefully.
When a discretionary trust holds the shares, participation percentages follow the distributions the trustee actually made in the relevant income year. If nothing was distributed, or small amounts were spread across many beneficiaries, the trust may have no significant individual at all, and no figure we produce can change that. Ask your tax adviser to review several years of distribution minutes before a buyer is engaged.
For tax purposes the ATO treats market value as the price that a knowledgeable, willing but not anxious buyer and seller would agree in an arm's length deal, and Division 152 adopts the same meaning. Cost and book equity seldom match it. A Mile End warehouse still shown at what it cost in the 1990s makes the group look smaller than it is, and a company valued at the net assets on its balance sheet leaves goodwill out altogether.
The income approach usually leads for the trading business. We adjust owner salaries, related-party rent and non-recurring items, capitalise the maintainable earnings that remain, and test the outcome against comparable sales using the market approach. That earnings-based value is how goodwill reaches the 80 per cent test, and it often converts a company that appears to fail on book figures into one that passes with room to spare. Real property, vineyards, plant and surplus assets are valued under the asset approach, with evidence from a registered property valuer where the amounts are material.
What you receive is a schedule rather than a single total. It sets out every entity in the group, each asset it holds, the market value at the test date, any related liability and whether the asset is active or excluded, together with the facts behind each label. Your tax adviser applies the aggregation and exclusion rules to that schedule and reaches the tax conclusion.
Very few claims are lost on a contested point of law. Most fail because a fact was never recorded or a value was struck at the wrong date, and nearly all of those problems could have been solved before the contract was signed.
A Division 152 claim can be reviewed several years after settlement, when the people involved have moved on and the report has to explain itself. If the group sits well inside the limits, a Summary report normally supports the claim. If the margin below $6 million is narrow, the 80 per cent test is close or the ATO has already raised questions, the analysis should be written out in enough detail for a second expert to check every step.
The report records the valuation date, the standard of value and the documents relied on, then moves through the group one entity and one asset at a time. Goodwill is supported by a normalisation schedule and a capitalisation rate, each explained; each property value is tied to named sales; and every active or excluded label is backed by the facts that justify it. A final reconciliation sets out in plain language why the approaches were weighted the way they were.
The certified valuer who signs it remains available to defend it: alongside your adviser while the sale is being structured, with the ATO during a review or objection, and before the Administrative Review Tribunal or the Federal Court of Australia in Adelaide if matters go further. If the sale later becomes a dispute between buyer and seller in the Supreme Court of South Australia, the report is written with the court's expert evidence rules under the Uniform Civil Rules 2020 (SA) in mind. Where the group owns South Australian land, the values we use agree with anything lodged with RevenueSA, so the evidence given to the state and the federal revenue authorities tells one consistent story.
Imagine an ATO letter arriving years after the sale has settled. Could you produce a signed, asset-by-asset opinion of what the group was worth on the day before you signed? If not, commission it before the contract, not after the letter.
Talk your situation through with a certified valuer before you commit to anything, at no cost.