Key takeaways
Measure the asset threshold immediately before the relevant event
The maximum net asset value test, sometimes shortened to MNAV, requires the relevant total not to exceed $6 million just before the capital gains tax event producing the gain. Ask your adviser whether this pathway applies and prepare records for that precise point, not an annual average.
Confirm whose assets belong in the assessment before valuing
The assessment can extend beyond the business being sold to assets of connected entities and certain other associated parties, subject to inclusion rules. Ask your adviser to map the relevant owners and exclusions so investment assets are considered and shares and underlying assets are not counted twice.
Support every liability deduction with records and adviser review
The net asset calculation allows relevant asset-related liabilities and specified provisions, rather than every expected expense or planned retirement reserve. Gather loan, creditor, employee entitlement and tax records for the same measurement point, and ask your adviser to review uncertain amounts rather than deducting them automatically.
Check home and personal asset exclusions rather than assuming
Personal assets, superannuation rights and a home may qualify for exclusions, but the applicable rules and business use can change the treatment. Keep an exclusions register with supporting values, borrowing records and property use details, leaving your adviser to determine what enters the calculation.
Disclose uncertain values without treating eligibility as assured
Unrecorded goodwill, investments or related-party receivables can materially change whether the relevant net asset total falls within the threshold. Show how reasonable valuation assumptions affect the result, and obtain separate advice on the other concession requirements rather than adjusting values to produce a preferred outcome.
Define the test being supported
Small business CGT concession analysis involves more than putting a value on the trading business. Your tax adviser should identify the particular test, relevant date and interests requiring valuation. This keeps the engagement focused on evidence your adviser actually needs, without presenting a valuation conclusion as confirmation that all eligibility conditions have been met.
Map the relevant interests
Provide ownership charts, trust and company documents, loan schedules and details of business and non-operating assets. Your adviser should determine which entities or interests belong in the tax analysis. The valuer can then assess the instructed subjects consistently, while recording exclusions rather than silently assuming that the trading entity represents the whole relevant asset position.
Distinguish value from balance-sheet amounts
Accounting carrying amounts may not reflect the value of a profitable business or its ownership interests. Analysis may need to address goodwill, surplus assets, debt and sustainable earnings. Where several interests are included, internal balances and overlapping assets need attention so the valuation evidence does not inadvertently count the same economic value more than once.
Signed
A clear valuation conclusion starts with an agreed purpose, relevant evidence and disclosed assumptions. The report identifies the interest valued and explains the reasoning behind its conclusion.
Deliver a transparent valuation schedule
The report can explain the assets or interests assessed, methods applied and material assumptions, supported by a schedule that your adviser can reconcile to their analysis. Any uncertain information should remain visible. A clear scope boundary is especially important when only selected interests are valued and other amounts are being supplied by the client or accountant.
Leave eligibility with the accountant
The report does not certify concession access, asset status or satisfaction of ownership and participation conditions. Your accountant must apply the relevant law to the complete circumstances. If the matter involves a past transaction, discuss retrospective valuation so evidence is assessed at the correct date rather than using today’s trading position.
Measure the $6 million test at the correct instant
The maximum net asset value test requires the relevant total not to exceed $6 million just before the CGT event producing the capital gain. It is not an annual average, a turnover threshold or simply the net equity in the business being sold. The ATO states that the limit is not indexed. Your adviser should first confirm whether this test is the relevant pathway and identify the event time.
Prepare a dated snapshot rather than relying on the nearest financial year end. Reconcile intervening dividends, asset purchases, refinancing and distributions. A payment after the event cannot simply be moved backwards into the calculation. Equally, a later settlement balance may reflect sale proceeds that did not exist in the same form immediately before the event.
Build the statutory group before collecting values
The calculation can involve the taxpayer, connected entities, affiliates and entities connected with affiliates, subject to the relevant inclusion rules. Affiliate assets are not automatically all included: the ATO describes business-use restrictions and an exception involving entities connected only through an affiliate. Ask the adviser to document the inclusion map rather than treating a family relationship as a complete statutory analysis.
List each asset's legal owner and explain why it enters or is excluded from the schedule. Investment assets may matter even when they are not active business assets. Where a connected company's underlying assets are included, obtain advice about excluding membership interests to avoid counting both the shares and the same underlying value. Group accounting eliminations alone do not answer these statutory questions.
Deduct qualifying liabilities, not every projected outgoing
The net value calculation deducts liabilities related to the relevant assets and provisions for annual leave, long service leave, unearned income and tax liabilities. This is not permission to deduct every forecast expense or the owner's desired retirement reserve. Obtain liability balances at the same just-before-event point as the assets, together with evidence explaining their connection.
Loan agreements, creditor ledgers, payroll entitlement calculations and tax reconciliations should support the amounts claimed. Do not automatically deduct tax expected to arise from the CGT event itself: the test is applied before that event, and liability recognition needs the adviser's analysis. Contingent claims, guarantees and proposed transaction costs also need specific review rather than a blanket percentage allowance. Identify any liabilities associated with excluded assets separately.
Document exclusions and mixed-use property carefully
Individual exclusions can cover personal-use assets, qualifying superannuation rights and a dwelling subject to the statutory rules. A home is not always wholly excluded: income-producing use and the relevant interest-deductibility considerations can affect the included amount. The adviser should explain the treatment of a home office, separate consulting rooms or other business use instead of assuming that every residential address is outside the test.
Maintain an exclusions register with the asset description, value evidence, legal rationale supplied by the adviser and treatment of associated debt. For mixed-use property, retain floor plans, use history and borrowing records. A valuation can supply the property's market value, but the proportion entering the MNAV calculation remains a separate application of the legislation.
Show sensitivity without manufacturing eligibility
Goodwill absent from the balance sheet can materially change the result. So can an investment property, unrecorded related-party receivable or understated ownership interest. Reconcile market values to the accounts and explain why any carrying amount is a reasonable proxy where it is used.
If plausible valuation assumptions straddle $6 million, disclose the sensitivity and the evidence supporting the adopted conclusion. Do not reverse-engineer a multiple to deliver a preferred outcome. Passing MNAV alone does not establish concession entitlement: active asset requirements, share or trust interest conditions and the requirements of the particular concession still need separate advice. A limited business-only report must not be presented as a complete group MNAV assessment.
Scope, fees and timing
See our fixed-fee valuation packages and confirm the scope and fee before commissioning work. Confirm the purpose, intended users, information requirements and inclusions in a written engagement before work begins. Calculated Value and Limited Scope delivery is 5–7 business days from complete financial information and a signed engagement. Full Conclusion timing is confirmed individually in the engagement letter. Specialist requirements or changes to the instruction may affect suitability and timing; confirm these before relying on an external deadline.
Sources and further reading
Frequently asked questions
Does a valuation prove I qualify for small business CGT concessions?
No. A valuation supplies evidence for the tests your tax adviser identifies; eligibility also depends on other conditions. Active asset requirements and additional rules for shares or trust interests may matter. Your accountant should determine the relevant concession pathway and conditions rather than treating a business value below a particular figure as automatic qualification.
Source: ATO — Small business CGT concessions eligibility conditions
What does the $6 million maximum net asset value test measure?
The ATO says the test considers the total net value of relevant CGT assets and must not exceed $6 million just before the CGT event. It is not simply a cap on the sale price of your trading business. Your adviser must identify the included entities, assets, liabilities and exclusions before valuation work is scoped.
Why is the measurement taken just before the CGT event?
That is the timing specified for the maximum net asset value test, so an ordinary year-end balance sheet may not answer it. Your adviser should confirm the event and exact measurement point. The valuation then needs date-relevant evidence, including material changes in assets or liabilities between the last accounts and the relevant event.
Do connected companies and other family interests need to be considered?
Potentially, but family relationship alone is not the complete test. The ATO rules address connected entities, affiliates and certain connected affiliate entities, with qualifications. Have your adviser map the relevant relationships and asset use. The valuation should follow that documented scope rather than assume either that every family asset counts or that only the trading company matters.
Can company loans and provisions simply be deducted from asset values?
Not automatically. The test has specific rules for related liabilities and provisions, and accounting presentation does not settle deductibility. Provide loan schedules and details of relevant provisions for your adviser to assess. The valuer can supply market value evidence, while your accountant determines which liabilities and provisions enter the statutory net asset calculation.
Could goodwill make the business worth more than its balance sheet?
Yes. A profitable business can have goodwill that is not fully reflected in its accounting records, although its value depends on the evidence. Earnings, customer relationships, transferability and business risk may be relevant. The assessment should avoid both overlooking goodwill and adding a separate goodwill amount where it is already captured in the chosen business valuation method.
Is the $6 million test the only route to the concessions?
No. The eligibility framework includes different conditions and possible pathways, so failing or not using this test does not itself settle the entire position. Ask your accountant which pathway applies and what valuation evidence is needed. The engagement should not promise eligibility or direct you to a particular concession based solely on a valuation result.
Source: ATO — Small business CGT concessions eligibility conditions
Are selling shares and selling business assets assessed the same way?
Not necessarily. The ATO identifies additional eligibility conditions where the CGT asset is a share or trust interest. The valuation subject and tax analysis therefore need to match the proposed transaction. Ask your adviser to specify whether operating assets, company shares, trust units or several interests require measurement before agreeing the report scope.
Source: ATO — Small business CGT concessions eligibility conditions
What if the supported value is close to the $6 million limit?
Small changes in assumptions or the included asset position may be important, so ensure the scope and supporting evidence are complete. The report should explain uncertainty and key value drivers without targeting a preferred threshold outcome. Your accountant should assess the full statutory calculation and any sensitivity, rather than relying on rounded figures or an informal estimate.
What should my accountant provide before I request concession valuation work?
Request a brief identifying the test, relevant date, included entities and precise interests requiring valuation, together with ownership and liability schedules. IBV agrees a Fixed Professional Fee upfront. Standard delivery is 5–7 business days after complete records and signed engagement. Eligibility advice and the final tax calculation remain separate from that timetable. This 5–7 business-day timetable applies to Calculated Value and Limited Scope only; Full Conclusion delivery is confirmed individually in the engagement letter.
Source: ATO — Small business CGT concessions eligibility conditions
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