When selling a business — or even a slice of one — how you value the assets involved can have a major impact on your tax bill. A recent Full Federal Court decision, Kilgour v Commissioner of Taxation [2025] FCAFC 183, offers timely guidance on how "market value" is really determined for capital gains tax (CGT) purposes.
Whether you're preparing for a sale, a restructure, or a future exit event, the case serves as a useful reminder: valuations must reflect real commercial conditions, not just theoretical models.
What Happened?
In 2016, three family trusts sold 100% of the shares in Punters Paradise Pty Ltd — an online wagering business — to News Corp for approximately $31 million. The ownership split was:
- Pettett Trust – 60%
- Kilgour Family Trust – 20%
- Reuhl Family Trust – 20%
The sale was negotiated at arm's length, involved extensive due diligence, and included a working-capital adjustment after completion.
The minority shareholders (the 20% holders) sought to access the small business CGT concessions. To do so, their net assets needed to fall below $6 million. Their argument? A 20% minority interest should attract a significant discount — because a small holding is generally worth less on a standalone basis.
The ATO disagreed. Its position was that each 20% parcel formed part of a coordinated 100% sale and should simply be valued as 20% of the final $31 million deal price.
The Court agreed with the ATO.
How the Court Approached Market Value
The Court applied the long-standing "willing buyer/willing seller" principles from Spencer v Commonwealth — but with a modern, commercial lens. Two practical messages stand out:
1. Real-world expectations matter more than rigid valuation dates
The tax rules in this area require looking at value "just before" signing the sale contract. However, the Court held that you cannot ignore things that were reasonably predictable at that point. Because the sale was essentially locked in through negotiations, the final agreed price was the best evidence of market value.
Practical takeaway: If a purchaser is clearly willing to pay a premium — for control, synergies, strategic value, or expansion opportunities — those factors will likely shape the valuation for tax purposes.
2. Actual deal terms beat theoretical discounts
The taxpayers argued for a typical "minority discount." The Court said the real commercial context matters more:
- All shareholders intended to sell together
- The buyer wanted all of the shares, not individual parcels
- A coordinated, 100% sale typically lifts the value of each parcel
Because of this, a hypothetical buyer would not insist on a discount. The minority interests effectively rode on the value of the full-stake sale.
Practical takeaway: When shareholders act collectively, the tax valuation of each interest can increase — sometimes significantly.
What This Means for Business Owners
Don't undervalue your stake. If the buyer is pursuing synergies or control, your interest might be worth more than a textbook minority valuation suggests. Make sure your advisers consider the wider commercial picture.
Evidence is everything. Keep thorough records — negotiations, emails, valuations, buyer motivations. These can be powerful in supporting your tax position and accessing concessions.
Plan CGT concession eligibility early. If you're relying on the small business CGT concessions, test different deal scenarios before signing any contracts or paperwork, including a heads of agreement. Sometimes restructuring ownership or staging a sale can make a material difference — but the tax system's integrity and anti-avoidance rules still need to be carefully considered.
Align shareholder expectations. In family groups and private companies, minority owners often assume their shares will be valued as a standalone piece. Kilgour shows that courts will often look at the transaction as a whole — not each slice in isolation.
The Bottom Line
Kilgour reinforces that valuations for tax purposes work best when they reflect the real commercial world. Before you sell, restructure, or negotiate with a potential buyer, involve your accountant early. A well-supported valuation can mean the difference between accessing valuable CGT concessions — or missing out entirely.
Need More Information?
If you are planning a business sale or restructure and would like to discuss how CGT valuations might apply to your situation, please contact our office to arrange an appointment.