For many Australian business owners, 1 July 2027 may become a very important tax date.

Major changes to Australia’s capital gains tax rules have now been passed into law. From 1 July 2027, the way capital gains are calculated for individuals, trusts and partnerships will change, including the replacement of the existing 50% CGT discount with inflation-based indexation for most affected assets and the introduction of a minimum 30% tax rate on certain capital gains.

Importantly, the Government does not intend these new rules to retrospectively tax gains that have built up before 1 July 2027.

That sounds straightforward. But it creates an obvious question:

If you eventually sell an asset several years from now, how will you establish how much of its growth occurred before 1 July 2027 and how much occurred afterwards?

For some business owners, the answer may involve establishing the market value of their asset at 1 July 2027.

And that is something worth thinking about well before the date arrives.

Why is 1 July 2027 important?

Under the new rules, an affected asset that you already own will effectively be divided into two periods for CGT purposes:

Period one: the gain that accrued before 1 July 2027.

Period two: the gain that accrues from 1 July 2027 until the asset is eventually sold or another relevant CGT event occurs.

The legislation achieves this by effectively treating certain assets as having been sold immediately before 1 July 2027 and reacquired on that date.

This is a tax calculation mechanism only. Clearly, you are not actually selling the asset on 30 June 2027 and there is generally no tax bill simply because 1 July 2027 arrives.

Instead, the calculation becomes relevant when the asset is eventually sold, transferred or otherwise disposed of in the future.

The purpose is to preserve the existing tax treatment of the value accumulated before 1 July 2027 while applying the new rules to value accumulated after that date.

Why does market value enter the picture?

Imagine you own shares in a private company.

Those shares may be worth $1 million today, $2 million at 1 July 2027 and $4 million when you eventually sell them.

To calculate the tax correctly, it may be necessary to establish how much of that gain belongs to the period before 1 July 2027 and how much belongs to the period afterwards.

One way of doing that under the new legislation is to establish the market value of the asset immediately before 1 July 2027.

For something traded openly on a market, this may be relatively straightforward.

For a privately owned business, however, there is no electronic board displaying its market price every day.

Determining the value of shares in a private company may involve considering matters such as earnings, assets and liabilities, cash flow, business risks, comparable businesses, market conditions, intellectual property and goodwill.

That is where valuation becomes much more important.

Does every business need a formal valuation?

No.

This is an important distinction.

The new law provides an alternative to using market value. Taxpayers will also be able to choose an apportionment method determined by the Government for separating the pre- and post-1 July 2027 components of a future capital gain.

Further ATO tools and practical guidance are expected to support this process.

This means a professional valuation at 1 July 2027 will not automatically be necessary or appropriate for every taxpayer or every asset.

The right approach will depend on the asset, the ownership structure, the quality of the information available, the likely significance of the future capital gain and the taxpayer’s individual circumstances.

But for some assets, particularly private business interests and other assets without a readily available market price, establishing a reliable market value at the relevant time may provide a much stronger tax position.

Business owners need to think beyond the company itself

There is another important point.

When we talk about valuing a business in this context, it does not necessarily mean that the operating company itself is being taxed under these new rules.

For many SME owners, the relevant CGT asset may actually be the shares they own in their private company, either personally or through another structure such as a trust.

To determine what those shares are worth, however, it may be necessary to establish the underlying value of the business.

That is why these changes could be particularly relevant to owners of successful private businesses whose shares have increased substantially in value over many years.

Other assets may also be affected, including certain interests in trusts, commercial property and other CGT assets.

What does the ATO expect from a market valuation?

This is where business owners need to be careful.

A market valuation for tax purposes is not simply a number that seems reasonable.

The ATO’s guidance makes it clear that a valuation should be replicable and defensible.

In simple terms, that means another appropriately qualified person should be able to look at the information, assumptions, methodology and evidence used and understand how the value was reached.

The ATO says a valuation should use an appropriate recognised valuation methodology and credible evidence. It should be thoroughly documented and based on information relevant to the date being valued.

Depending on the asset, valuation methods may include market comparisons, income or earnings-based approaches, discounted cash flow methods or asset-based approaches.

There is no single formula that will be appropriate for every business.

And that matters.

An inexpensive online calculation that simply multiplies profit or EBITDA by a generic industry multiple might produce a number. But producing a number and producing a defensible market valuation for tax purposes are not necessarily the same thing.

The valuation may not be tested for many years

This is perhaps the most important issue for business owners to understand.

Suppose you obtain a valuation of your business interest at 1 July 2027 and then sell the business in 2035.

Your 2027 valuation may not become important until eight years later.

If the ATO reviews the eventual CGT calculation, you may then need to demonstrate why the value adopted back in 2027 was reasonable.

By that time:

• financial records may be harder to locate;
• employees or advisers with knowledge of the business may have moved on;
• economic and industry conditions will have changed;
• the business itself may look completely different;
• and reconstructing what a willing buyer might have paid for the business in 2027 could be considerably more difficult.

That is one reason contemporaneous evidence can be so valuable.

A valuation does not become safe simply because a professional prepared it

There is another important warning in the ATO’s own guidance.

Even where a professional valuer is engaged, responsibility for supporting the tax position ultimately remains with the taxpayer.

The ATO expects the person conducting the valuation to have suitable knowledge and experience, to act objectively, to have access to the information necessary to perform the work properly and to use an appropriate methodology supported by credible evidence.

For members of the Australian accounting profession providing valuation services, professional requirements including APES 225 Valuation Services may also apply.

The lesson is simple.

If a valuation is going to become an important part of your future tax position, the quality of the valuation matters.

The cheapest valuation is not necessarily the least expensive option if it cannot withstand scrutiny several years later.

What happens if the ATO disagrees?

The ATO can review market values used in tax calculations.

Its guidance indicates that the likelihood of review can increase where an asset is valuable, the valuation methodology is contentious, the calculation is complex or intangible assets such as goodwill are involved.

If the ATO does not accept a valuation, the consequences may extend beyond simply substituting a different number.

A changed valuation could alter the amount of taxable capital gain and therefore the tax payable. Depending on the circumstances, interest and penalties may also become relevant.

There can also be considerable time and professional cost involved in defending a valuation during an ATO review or dispute.

The objective should therefore not be to find the highest possible value, the lowest possible value or the value that produces the most favourable tax outcome.

The objective should be to establish a reasonable, evidence-based and defensible market value where the market-value method is being used.

Who should start thinking about this now?

The changes are particularly worth discussing if you:

• own a significant interest in a privately held company;
• own a business through a trust or other structure;
• hold an interest in a business that has increased substantially in value;
• have valuable business goodwill or intellectual property;
• hold significant commercial property or other unlisted investments;
• are considering selling your business in coming years;
• are developing a business succession plan;
• are considering transferring business interests to family members; or
• hold assets acquired many years ago, including potentially assets dating from before the introduction of CGT.

Being in one of these categories does not automatically mean that you need a valuation.

It means it is worth determining whether the new rules affect you and, if they do, what preparation is appropriate.

Why start the conversation before 1 July 2027?

You do not need to rush out today and order valuations of everything you own.

But waiting until June 2027 is not a particularly attractive strategy either.

For business assets, good valuations depend on good information.

That may mean making sure financial statements are current, unusual or non-recurring income and expenses are understood, ownership structures are clearly documented, significant assets and liabilities are identified and information supporting goodwill and business performance can be readily accessed.

There is also likely to be significant demand for appropriately experienced valuers as 1 July 2027 approaches.

Starting the conversation early gives you time to identify which assets actually matter, understand the available options and decide whether a contemporaneous valuation will strengthen your position.

This is about certainty, not simply compliance

It is easy to look at these changes as another tax compliance requirement.

We think there is a more useful way for business owners to view them.

If a substantial part of your wealth is represented by a privately owned business, the value adopted at 1 July 2027 could potentially influence a tax calculation many years into the future.

Getting that position properly considered and documented can provide something equally important to complying with the law: certainty.

If your business is eventually sold, transferred or restructured, you want to be confident that the tax position you rely upon is supported by evidence prepared when the information was readily available, not reconstructed years afterwards.

What should you do now?

The first step is not necessarily obtaining a valuation.

The first step is identifying whether you hold assets that may be affected.

Indigo Financial will be working with clients ahead of 1 July 2027 to consider their structures and relevant assets, assess whether a market valuation may be appropriate and, where specialist valuation expertise is required, help ensure the process is approached properly.

There is still time.

Using that time well is the important part.

If you own a business or significant private investments and would like to understand how the new CGT rules may affect you, speak with your Indigo Financial adviser.

Contact Indigo Financial on (08) 8212 8585 if you need help with understanding any of your accounting, taxation and business development needs.

Sources

• Australian Taxation Office, Market valuation for tax purposes
• Federal Register of Legislation, Treasury Laws Amendment (Tax Reform No. 1) Act 2026
• Australian Treasury, Budget 2026–27 tax system changes
• Australian Treasury, Capital Gains Tax and Discretionary Trusts Reform: Small business explainer
• Parliament of Australia, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 – Bills Digest
• CPA Australia, Preparing for tax time: Change is in the wind, 2 July 2026
• Accounting Professional & Ethical Standards Board, APES 225 Valuation Services
• Accountants Daily, Early engagement is key ahead of valuation requirements, 27 August 2026