Buying out a partner or co-owner in Melbourne? One value both sides can rely on, from $1,495 + GST.

Many partnership deeds, shareholders' agreements and unit holders' agreements set a price formula: a multiple of average profits, book net assets, the capital account, or a "fair value" set by the firm's accountant. Between the owners, that formula generally binds; they signed it. The ATO did not. For tax, the deal is measured against market value, and where the parties do not deal at arm's length, market value can replace the agreed price (section 116-30). A formula price below market can still leave the outgoing owner with a gain worked out at market value. Old formulas make it worse: one written twenty years ago may bear no relation to what the firm is worth now. Where the two differ, our report gives both figures and the gap between them, so the lawyers and accountants deal with it on purpose.

The hardest question in a practice buy-in is whether the goodwill belongs to the practice or to the people in it. A clinic with good systems, its own premises, patient recall, employed staff and a name patients come back to has goodwill that transfers. A practice that is really one practitioner's personal effort has very little. In accounting and law firms, recurring compliance work behaves differently from advisory relationships that follow one partner. In the trades, contracts, prequalifications and licences held by the entity transfer; those held personally do not. A buyer should pay only for goodwill that survives any one person leaving. We separate practice goodwill from personal goodwill, test the split against the evidence, and check whether the restraint clauses actually protect what is being bought.

A 20% interest is not automatically worth 20% of the firm. On an open market, a fraction with no control and no ready buyer would attract discounts for both. But most buy-ins and buyouts are not open-market sales. They happen inside a working firm whose agreement creates the market: continuing owners obliged to buy, a set share of profits, a seat at the table. Some agreements rule out discounts and require a pro rata share of the whole firm's value. Where the agreement is silent, the facts decide. Someone buying full partner rights and a full profit share is not in the shoes of a passive buyer of a minority stake. Our report says whether a discount applies here, how large, and why.

For CGT, each partner is treated as owning a share of each partnership asset (section 106-5), so a retiring partner disposes of those shares, goodwill included. Where the parties are related or not dealing at arm's length, market value can apply, which is why the value has to be supportable rather than convenient. The retiring partner may look to the small business CGT concessions in Division 152, where eligibility can depend on market values through the $6 million test and the active asset test. The incoming partner's payment sets their cost base in what they acquire (section 110-25), including any amount for goodwill and work in progress. Our report gives the accountant the market values for each position. We are not a registered tax agent and give no tax or legal advice.

Much of this work in Melbourne is professional practices, such as medical and dental clinics, accounting firms and engineering consultancies, plus family companies and unit trusts in the trades and manufacturing. Start with the document that governs the interest. For a partnership it is the deed, read with the Partnership Act 1958 (Vic), the Victorian statute your lawyer will look to where the deed is silent. For a company it is the constitution and any shareholders' agreement; for a unit trust, the trust deed and any unit holders' agreement. If a company buyout turns into a dispute, section 1337B of the Corporations Act puts it in the Supreme Court of Victoria or the Federal Court. We value under the agreement's basis when instructed and show market value beside it.