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What a business valuer does, and when you need one

By , founder of SignetryLast reviewed

General information, not financial, tax or legal advice. Ask your accountant or a valuer whether you need a formal valuation, and what it should cover.

A business valuer gives an independent, evidence-based opinion of what a business is worth, using an accepted valuation method and a written report that sets out the methodology, the assumptions and the evidence behind the figure. That is different from a broker's appraisal, which is a price the broker thinks the market will pay, used to set an asking price rather than to stand up as independent evidence. A formal valuation is the safer choice when the figure has to hold up to the ATO, a court, another shareholder or a lender. The ATO says a report from a suitably qualified professional following commonly accepted industry standards "is considered more reliable by us"1.

When a formal valuation helps

The maximum net asset value test is one of the tests which can be used to see if you meet step one of the small business CGT concessions, as an eligible entity2. To pass it, the net value of your CGT assets, and those of connected entities and affiliates, must not exceed $6 million just before the relevant CGT event2. Net value is the sum of the market values of those assets, less any related liabilities2. An affiliate's assets, or those of an entity connected with an affiliate, only count if they are used, or held ready for use, in a business run by you or an entity connected with you2. The $6 million limit is not indexed for inflation2.

Common reasons people commission a formal valuation:

  • A partner or shareholder buyout, where the outgoing and remaining owners need a number neither side simply asserted.
  • A deceased estate or family law matter, where a court or the parties need an independent figure.
  • Finance, where a lender wants a valuation to support security over the business, distinct from an asking price.

What makes a valuation credible to the ATO

There is no formal admissions board in Australia for business valuers1. What the ATO does set out, in its guidance on market valuations for tax purposes, is what makes a valuation credible if it is tested: a report from a suitably qualified professional, following commonly accepted industry standards, that states the purpose and scope of the valuation, identifies the asset, gives the valuation date, sets out the evidence for the figure reached, and explains the methodology1. If the ATO reviews a valuation, the onus for providing a replicable and defensible valuation stays with the taxpayer, even where a professional was engaged to prepare it1. Professional valuers must also comply with additional valuation standards, such as APES 225 Valuation Services1.

A valuer's report vs a broker's appraisal

A broker's appraisal is a starting point for a conversation with the market: what a broker believes buyers will pay, based on comparable sales and their read of demand. It is a useful number for setting an asking price, and it is what most brokers give as part of listing a business (see choosing a business broker). It is not independent, because the broker's fee usually depends on the business selling, and it is not built to the evidence and methodology standard a valuer's report is.

A valuer's report is built to stand on its own: it states its methodology (often an earnings multiple, discussed on multiples and earnings, or a net asset approach), the evidence behind every input, and the assumptions it relies on. That is what makes it usable for tax, legal or lending purposes where a broker's appraisal is not.

What to ask a valuer before you engage one

  • What method will you use, and why does it fit this business?
  • What professional body are you a member of, and what professional standards will the report follow, for example APES 225?
  • Will the report state its evidence and methodology in enough detail to be tested if it needs to be?
  • What is this valuation for, and does that change what the report needs to cover?

Sources

  1. Market valuation for tax purposes, Australian Taxation Office, amendment history shows 12 February 2025 as the most recent update, accessed 24 Sep 2026. Confirms there is no formal admissions board in Australia for business valuers, that a report from a suitably qualified professional following commonly accepted industry standards "is considered more reliable by us," what a valuation report should cover, that the onus for a defensible valuation stays with the taxpayer even where a professional is engaged, and that professional valuers must also comply with additional valuation standards such as APES 225 Valuation Services.
  2. Maximum net asset value test, Australian Taxation Office, last updated 6 May 2024, accessed 24 Sep 2026. Confirms the test is one of the tests which can be used to see if you meet step one of the small business CGT concessions as an eligible entity, the $6 million threshold, that net value is the sum of the market values of assets less related liabilities, that an affiliate's assets count only if used or held ready for use in a business run by you or an entity connected with you, and that the threshold is not indexed for inflation.

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