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Passing a business to a daughter, son or long-serving relative has to pay for the founder's retirement, leave the successor something that can carry its price, look even-handed to the children who stay out of it and satisfy both the ATO and Revenue NSW. All four checks start with what the business is worth.
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A succession valuation puts a market value on a Wollongong family business, or on the shares or units changing hands, at the date control passes to the next generation. The ATO uses market value for dealings between relatives whatever price is paid, so this single number shapes sibling equalisation, what the successor can fund and any Division 152 relief.
Family-owned firms are common across the Illawarra, and many of their founders are now closer to retirement than to starting out: fabrication and engineering workshops around Port Kembla and Unanderra, builders and trades businesses serving new housing at Dapto and Albion Park Rail, cafe and accommodation owners in Kiama and Shellharbour, and professional practices along Crown Street and in North Wollongong. Plenty would rather hand over to a daughter, son or trusted relative than sell to a stranger. It is also the exit that gets the least scrutiny, because no outside buyer tests the price and often no price is ever fixed.
The number matters because several people lean on it. The founder has to know whether the business can fund retirement. The successor needs something that can service the price. The children outside the business need to see they were treated evenly. And for tax, the ATO treats a dealing between relatives as made at market value, whatever actually passed across.
With no agreed figure, a family negotiates by instinct. With one, the questions turn practical: how much, paid how, over what period, and what everyone else receives in return. Sibling disputes over a family business are among the most bitter we are asked to help with, and most trace back to a value that was assumed instead of established. They can resurface years later as a family provision claim under the Succession Act 2006 (NSW), which in some circumstances lets the Court treat property transferred before death as notional estate.
We value businesses, shareholdings and unit holdings for families across Wollongong, Shellharbour, Kiama and the wider Illawarra, from a Unanderra engineering workshop to a Fairy Meadow professional practice. The valuer sets the market value and explains it to everyone at the table; your accountant and lawyer then build the transfer around it.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
A handover can feel like a gift and still be a transaction for tax, for duty and for anyone who contests it later. Your tax adviser applies each rule below; the valuer supplies the market value they are measured against.
The 15-year exemption fits succession well. Where an owner aged 55 or over has held the asset for at least 15 years and disposes of it in connection with retirement, the whole capital gain can be disregarded. Eligibility depends on the $2 million aggregated turnover test or the $6 million net asset test applied just before the transfer, and the net asset test is itself a valuation covering the owner, connected entities and affiliates.
Between relatives, tax law puts aside the price actually paid and uses market value in its place. Shares moved at book value, for a token sum or as a gift still produce a capital gain measured on what the parcel was really worth, and an understated figure can be reopened years afterwards with shortfall interest and penalties.
If the handover includes the business premises, or an interest in a landholding company or trust, duty under the Duties Act 1997 (NSW) may come into question, including its landholder duty provisions, and Revenue NSW can look to the value of the property rather than the family price. Whether duty applies, and how much, is for your lawyer to confirm; our land and business figures give them values to work from.
Division 7A can treat a shortfall as a deemed dividend when a private company's business, or value from it, moves to a shareholder or associate for less than market consideration. It tends to be set off by accident: a discounted share transfer, an unpaid present entitlement or a family loan nobody put in writing.
Superannuation planning should run alongside these rules. A gain covered by the 15-year or retirement exemption can go into super under the CGT cap, outside the usual contribution caps, but only if the election reaches the fund no later than the contribution. If it does not, the benefit is generally lost, because the missed step cannot be fixed afterwards.
A valuation taken on the day of transfer records the position; one taken well beforehand can still change it. That leaves time to lift value drivers, to restructure so the Division 152 tests are met, to lengthen the handover and to let the family talk without a deadline. The most useful succession valuations are the ones nobody has to commission yet.
The test is market value: what the business, or the parcel being passed on, would fetch between an informed, willing buyer and an informed, willing seller, neither acting under pressure. That is deliberately an outsider's figure. It is not what the successor can afford, what the founder hopes for or what keeps the siblings content, though showing it to everyone usually eases all three discussions.
Where the business is an established trader, the income approach takes the lead. Future maintainable earnings are capitalised at a rate that reflects how likely they are to continue once the founder steps away, which in succession is the central risk. Where customers, supplier terms, licences or technical know-how sit with the founder personally, part of the earnings will not make the journey, so the valuation separates goodwill that stays with the business from goodwill that leaves with the person. A Port Kembla fabrication shop whose key customers deal only with the founder is a different asset from one where the successor has managed those accounts for ten years.
The market approach cross-checks the result against sales of comparable businesses, and shows the family what an outside sale could realistically achieve as the alternative. The asset approach sets the floor, and for any business that owns its premises, such as a Unanderra workshop or a Kiama accommodation property, it is often the figure that matters most, because the land can be worth several times the operating business on it.
These patterns turn up when a family handover reaches us after the event, usually because the business is now being sold or a will is being contested in the Supreme Court of New South Wales in Sydney.
How deep the report goes depends on who will rely on the figure and how closely it may be examined later. A founder still testing whether retirement is affordable is well served by a clear internal view first. Once the value fixes a transfer price, supports a Division 152 claim or settles what each child receives, it should be certified.
Each report states the purpose, the standard and premise of value, the valuation date and the information relied on. Each normalisation is set out alongside the reason for it. The report shows how reliance on the founder was assessed and what it did to value, links the capitalisation rate and any multiple to named sources, and reconciles the approaches into a range with the weighting explained plainly. Where control, a minority parcel or a staged tranche changes the answer, each is valued on its own so the family sees the complete picture.
Family transfers are often reopened long afterwards, sometimes a decade on, when the business is sold or a family provision claim comes before the Supreme Court of New South Wales in Sydney, or a related commercial dispute reaches the District Court at Wollongong. An expert's report in those courts must meet the Expert Witness Code of Conduct in the court rules. We write it so a reader who took no part in the family discussions can follow it. A certified valuer signs it, walks your accountant, lawyer and family through it, and defends it if the ATO, Revenue NSW or another expert disputes it.
Suppose one of my children challenged this handover in ten years. Would the report alone show why the figure was right on the day? If the answer depends on anyone's memory, the valuation has not done its job.
Talk your situation through with a certified valuer before you commit to anything, at no cost.