The 2026 Federal Budget has introduced a date that every private business owner in Australia should have marked in bold: 30 June 2027.
That date is not just a tax year end. It is now the dividing line between two entirely different capital gains tax regimes — and where your business sits on that line will directly determine how much tax you pay when you eventually sell.
This article explains why a specialist, independent business valuation as at 30 June 2027 is not merely prudent — for many SME business owners, it could save tens or hundreds of thousands of dollars. And why getting it wrong, or leaving it to a formula, carries risks that are entirely avoidable.
What Changed and Why It Creates a Valuation Problem
Under the new CGT rules, when a business owner eventually sells their business, the taxable gain will be split into two parts:
- The gain that accrued before 1 July 2027 — taxed under the old rules, with the 50% CGT discount still available
- The gain that accrues from 1 July 2027 onwards — taxed under the new rules, with cost base indexation and a minimum tax of 30%
To calculate that split, the ATO requires a value of the business as at 1 July 2027. That value becomes the baseline — the deemed cost base — from which all future gain is measured.
For listed shares, that value is simple: it is the market price at that date. For a private business, there is no market price. The value has to be established — and how it is established matters enormously.
The Two Methods Available — and Why One Is Significantly Riskier
The Government has confirmed that business owners will have two options to establish their 1 July 2027 value:
Option 1: An independent market valuation A formal, defensible valuation prepared by a qualified professional as at 1 July 2027, reflecting the actual commercial value of the business at that date.
Option 2: The ATO’s apportionment formula A digital tool provided by the ATO that estimates the 1 July 2027 value by applying a straight-line growth rate over the entire holding period of the asset.
The formula sounds simple. The problem is that it assumes a business grew at an identical rate every single day from acquisition to sale. For the vast majority of private businesses, that assumption is wrong — sometimes dramatically so.
Consider a straightforward example:
A business owner purchased their business 12 years ago. In the first seven years, the business grew strongly — they built the client base, developed systems, and created the value that exists today. In the past five years, growth has been more modest. The bulk of the real value was created well before 1 July 2027.
Under the ATO formula, the growth is assumed to be even — meaning only 7/12ths of the total gain is treated as pre-2027 and eligible for the 50% discount. The remaining 5/12ths is automatically assigned to the post-2027 period and taxed at a minimum of 30%.
Under an independent valuation that actually reflects when the value was created, the picture is very different — and the pre-2027 gain, and therefore the 50% discount, is significantly larger.
One published analysis illustrated the difference on a $10 million gain: the formula produced over $780,000 more in tax compared to a valuation that accurately reflected the timing of growth. That is not a planning strategy. That is simply the cost of failing to document when value was actually created.
The ATO Will Scrutinise Valuations — Especially for Businesses
The ATO has made no secret of its intention to scrutinise CGT valuations closely under the new regime. The Budget was accompanied by an announcement of more than $700 million in new ATO compliance funding. A substantial portion of that investment will be directed toward reviewing CGT transactions, including valuations used to establish the 1 July 2027 cost base.
For private businesses — unlike shares or real property — there is no external reference point. The value cannot be looked up. It must be calculated, supported, and explained. A valuation that cannot withstand scrutiny is not a valuation — it is a liability.
This is precisely the environment where the credential of a CAANZ-accredited CA Business Valuation Specialist matters. A specialist valuation is prepared in accordance with Australian valuation standards, APES 225, and ATO valuation guidelines. It documents the methodology, the assumptions, the comparable evidence, and the reasoning. It is built to stand up — to a buyer, a court, or an ATO review.
A general accountant preparing a rough assessment is not the same thing. And in this regulatory environment, that distinction carries real financial consequence.
Pre-CGT Business Assets — An Often Overlooked Exposure
Some of the most significant exposures created by the Budget relate to businesses and assets that have never previously been subject to capital gains tax at all.
Assets acquired before 20 September 1985 — pre-CGT assets — have historically been entirely exempt. That exemption is being wound back. For gains arising from 1 July 2027, even pre-CGT assets held by individuals, trusts, and partnerships are now in scope.
For business owners who have held their business or its underlying assets for decades without any CGT concern, this is a material change. The 1 July 2027 value now becomes the deemed cost base for these assets — and everything above that value at the time of sale is taxable under the new regime.
Without a formal valuation at that date, the entire future gain on a pre-CGT asset could be exposed to the 30% minimum tax with no means of demonstrating that prior growth was exempt.
Trust Structures and the Restructuring Window
For business owners operating through discretionary trust structures, the picture is further complicated by the 30% minimum tax on trust distributions commencing 1 July 2028.
The Government has acknowledged the disruption this creates and has provided a three-year CGT rollover window — from 1 July 2027 to 30 June 2030 — during which business assets can be transferred out of a discretionary trust into a company or other structure without triggering CGT.
For business owners considering whether to restructure, a valuation is a prerequisite — not an afterthought. Understanding the current value of business assets held in trust is essential to:
- Assessing whether restructuring makes commercial sense
- Quantifying the CGT exposure that the rollover relief is designed to avoid
- Ensuring the restructured entity is valued correctly for stamp duty and ongoing compliance purposes
The rollover window is finite. It will not be extended. Business owners who delay the conversation risk running out of time — and running into a trust tax and a CGT event they could have avoided.
The Small Business CGT Concessions — Now More Valuable Than Ever
One piece of genuinely good news in the Budget is that the Division 152 small business CGT concessions remain fully intact. For eligible business owners, these concessions can still reduce or eliminate the capital gain on a qualifying business sale.
However, eligibility for these concessions is not automatic. The asset must meet the active asset test. The business must meet the basic conditions. The structure of the sale must be designed appropriately. And in many cases, a formal valuation is required to demonstrate eligibility — particularly where the maximum net asset value threshold is in question.
Given that the concessions have become more valuable relative to the new CGT regime, the risk of inadvertently failing to qualify — through poor structuring, inadequate documentation, or a valuation that does not support eligibility — has never been higher.
Why Timing Matters — and Why You Should Act Now
Many business owners will be tempted to wait. The 1 July 2027 date is still some months away, and the legislation is still working its way through Parliament. But there are good reasons not to delay.
Financial data quality — a valuation as at 30 June 2027 will be supported by financial statements, management accounts, and operational data from around that date. The further in time you get from that date, the harder it becomes to reconstruct the picture accurately and the more exposed the valuation becomes to challenge.
Access to advisers — it is reasonable to expect that demand for specialist business valuations will increase significantly as 30 June 2027 approaches. Leaving it to the last quarter risks delays, reduced access to experienced specialists, and rushed work that does not achieve the best outcome.
Restructuring lead time — if a valuation reveals that restructuring would be beneficial, there needs to be sufficient time to implement those changes within the rollover window and before the trust minimum tax commences.
Peace of mind — knowing what your business is worth at the transition date, and having that documented independently, removes a significant source of uncertainty about your future tax position.
What a 19 Steps Valuation Provides
At 19 Steps Business Advisory, we provide independent, ATO-compliant business valuations for Australian SMEs. As a CAANZ-accredited CA Business Valuation Specialist and nominated member of the CAANZ Specialist Advisory Group on Business Valuation, Navneet Jyoti brings the technical depth, independence, and regulatory awareness that this environment demands.
Our 1 July 2027 transition valuations are:
- Prepared to Australian valuation standards and APES 225 requirements
- Documented and defensible — built to withstand ATO review
- Commercially grounded — reflecting the real drivers of value in your business, not a formula
- Integrated with your tax position — as a registered tax agent with deep CGT expertise, Navneet understands how the valuation interacts with your overall tax outcome
A formal valuation is not an expense. In the context of what is at stake under the new CGT regime, it is one of the most cost-effective investments a business owner can make.
The Right Time to Act Is Now
The businesses that come through this period of tax reform in the strongest position will be those that understood the changes early, obtained independent advice, and made deliberate decisions — rather than those who relied on a formula and hoped for the best.
If you own a private business, hold business assets in a trust, or have been relying on the 50% CGT discount as part of your exit strategy, we invite you to have a confidential conversation with 19 Steps before 30 June 2027.
This article is intended as general information only and does not constitute tax or legal advice. Readers should seek independent professional advice tailored to their specific circumstances. Navneet Jyoti is a Registered Tax Agent and CAANZ-accredited CA Business Valuation Specialist.