Identify what is moving and between which entities
A restructure rarely moves a single thing. The operating business may go to a new company, the premises may stay in a trust, the trade marks may sit in a holding entity, and shares may be issued or transferred in exchange. Each of those is a different asset with a different value, and each transfer may attract a different provision.
The first page of the report should therefore say precisely what is being valued, who owns it before the transaction and who owns it after. Where several assets move, the report should give each its own figure and explain how the total was allocated between them.
Common subjects of a restructure valuation
| What is moving | Typical transferor and transferee | What the valuer needs |
|---|---|---|
| Operating business (goodwill and trade assets) | Sole trader or partnership to a company or trust | Financial statements, asset register, lease, key contracts |
| Specific assets or plant | One related entity to another | Asset list, purchase records, condition and age |
| Intellectual property | Operating entity to a holding entity | Registrations, licence terms, revenue attributable to the IP |
| Shares in a company | Individual to a trust, or one company to another | Constitution, member register, business valuation, balance sheet |
The valuation date is the transaction date
Market value for a transfer is assessed as at the date the transaction takes effect. That is usually the date the transfer agreement or resolution is signed, or a date the documents specify. It is not the last financial year end, and it is not the date someone eventually gets around to commissioning the report.
Fixing the date matters because a business can change materially within months. New contracts, a lost customer, a change in trading conditions or a change in the owner's involvement can all move the value. Our guide on the valuation date covers how the date is chosen and why it is treated as a firm boundary.
If the restructure has not yet happened, the cleanest approach is to value the assets as at the intended date and have the documents refer to the report. If it has already happened, the report can still be prepared as at that earlier date, but it must be careful about what it relies on.
Work only from the evidence available at that date
A report prepared for a past date should use financial statements, management accounts, contracts and market information that existed, or were reasonably foreseeable, on that date. Later results can be tempting, especially when they support the conclusion, but drawing on them undermines the basis of value and invites the reviewer to discount the whole report.
Where the date falls mid-year, interim management accounts to the date are usually needed, together with the last full-year statements. If the records are thin, the report should say so and explain how the gap was handled rather than fill it silently. A reviewer is more likely to accept a limitation that is stated than one that is discovered.
Related-party arrangements need arm's length adjustment
Businesses owned within a family group often pay rent to a related trust, wages to family members, management fees to a related company or interest on loans from the owners. Those amounts may be set for reasons that have nothing to do with market rates. Under independent ownership the business would pay what the market requires, and its earnings would look different.
The valuation must therefore adjust each related-party item to an arm's length level and record the evidence for the adjusted figure, such as a market rent appraisal or comparable salary data. The same discipline applies to the balance sheet, where related-party loans and unpaid entitlements can sit between the enterprise value and the equity value. The enterprise value versus equity value guide shows how those items are bridged.
Document the method and assumptions for a reviewer
A reviewer who was not present when the report was prepared has only the document to go on. The report should state the basis of value, the date, the information relied on, the method chosen and why, every material adjustment to earnings, the multiple or capitalisation rate and the reasoning behind it, and the bridge to the final figure. Assumptions should be listed, not buried.
Where judgement was required, the report should show the alternatives considered and why one was preferred. A conclusion supported by a range and a cross-check from a second method is more persuasive than a single figure. The report should also make clear that it applies market value in the sense a reviewer expects, rather than a price agreed between the parties.
The valuer values and the tax adviser advises
The valuer's job is to assess market value at the date and to document the reasoning. Whether the transfer qualifies for a rollover, whether small business CGT concessions are available, how the value is reported and what elections to make are matters for your tax adviser. A valuation report informs that advice; it does not replace it.
No report can bind the ATO or any other reviewer to a figure. What a careful report can do is make the reasoning transparent enough that a reviewer tests the evidence rather than the credibility of the number. The tax and restructure valuation service is designed around that standard and works alongside your adviser.
What a reviewer looks for, and how to prepare
A reviewer looks for a stated basis and date, an identified subject, evidence that existed at the date, a method that suits the business, adjustments that are explained and supported, and a conclusion that follows from the working. Gaps in any of those invite questions.
Before commissioning the report, ask your tax adviser to confirm the transaction date, the assets moving and which entity holds each before and after. Gather the last three years of financial statements, management accounts to the date, the asset register, leases, key contracts, IP registrations and any related-party agreements. Then contact Jackson Wilson for a free first conversation about scope and timing; standard signed reports start from $1,495 + GST for suitable, straightforward matters, and complex restructures are quoted after scoping.
Apply it to your matter
A clear scope is the next step.
Discuss the business, purpose, valuation date and intended user with Jackson Wilson. Valuation Group is based in Double Bay and takes enquiries from Sydney and Australia-wide.
General educational information. Examples are hypothetical and do not value a real business. The appropriate treatment depends on the purpose, evidence and agreed scope.