Small business CGT concession valuations, including the $6 million test, from $1,495 + GST.

The test adds up the net value of the CGT assets of you, entities connected with you, your affiliates and entities connected with them. An entity you control, generally with 40% or more of its income, capital or votes, is connected with you. You pass if the total just before the CGT event is no more than $6 million (section 152-15). Net value is market value less related liabilities and provisions for annual leave, long service leave, unearned income and tax (section 152-20). It uses market values, not book values, and goodwill counts. The $6 million is not indexed. For a sale under a contract, the CGT event is generally when the contract is made, not at settlement (section 104-10). Every CGT asset of each entity counts unless the law leaves it out, not just business assets; for affiliates and their connected entities, only assets used, or held ready for use, in your business or a connected entity's business count. The ATO lists getting the $2 million turnover and $6 million asset limits wrong among the common errors it sees. A property valuer values real property; we value the business, its goodwill, and shares or units.

• Shares, units and other non-debt interests in an entity connected with you or your affiliate are left out, so nothing counts twice; liabilities related to them still come off.
• For an individual, assets used solely for personal use are left out, and so is the home, except to the extent it produced income.
• For an individual, superannuation rights and life insurance policies are left out.
• A liability comes off only if it relates to counted assets, such as a loan for business premises.
• An interest-earning personal bank account counts, because it earns income.

A share in an Australian resident company, or an interest in a resident trust, can be an active asset only through the 80% test (section 152-40). The market value of the entity's active assets, plus cash and financial instruments inherently connected with its business, must be at least 80% of the market value of all its assets. An asset mainly used to earn rent, such as property let to an unrelated tenant, is generally not active. Every figure is a market value, goodwill included. The test must be met for at least half the time you owned the shares or units, or 7.5 years if you owned them for more than 15 years; it is not applied day by day. We value the company or trust and any entity the test looks through to. For CGT events from 8 February 2018, selling shares or units also has extra conditions (section 152-10):

• You carry on a business just before the CGT event, or you meet the $6 million test.
• The company or trust itself meets the $2 million turnover test or the $6 million test, counting entities it controls at 20% rather than 40%.
• You are a CGT concession stakeholder in it, or the 90% test is met.
• The shares or units pass a modified 80% test that looks through to entities the company or trust holds.

Once the basic conditions are met, four concessions can reduce, disregard or defer the gain. All but the 50% reduction have extra conditions of their own. Which apply, and in what order, is for your accountant.

• 15-year exemption (Subdivision 152-B): the whole gain is disregarded where, among other conditions, the asset was owned for 15 years and the owner (or, for a company or trust, a significant individual) is 55 or over and retiring, or permanently incapacitated.
• 50% active asset reduction (Subdivision 152-C): the gain is halved, automatically unless you choose otherwise.
• Retirement exemption (Subdivision 152-D): gains disregarded up to a $500,000 lifetime limit per individual; under 55, the amount goes into a super fund or retirement savings account.
• Roll-over (Subdivision 152-E): the gain is deferred where a replacement asset is acquired, or capital improvements are made, generally from one year before to two years after the last CGT event in the year.

If the sale has already happened, we value as at just before the CGT event, using only what was known, or reasonably foreseeable, then. The ATO's guide judges prudence at the valuation date, not with hindsight, and names a retrospective date as something a report should state. We never value at a future date: the guide says a prospective assessment will not be considered reasonable or acceptable for tax.

Your accountant tells us which tests apply, which entities count, and the date of the CGT event. We value to that and state exactly what was valued and as at when. One signed report gives a separate conclusion for each entity, with the date, the market value definition, the method and reasons, and the evidence, assumptions and information relied on, plus a supportable range beside the concluded value and an independence statement. The working file is kept for ten years. We are not a registered tax agent; your accountant applies the values. Before you engage we tell you what we need, usually:

• Financial statements for the last three years, and year-to-date accounts, for each entity
• The group structure, including connected entities and affiliates
• The sale contract, or the expected contract date
• The asset register and depreciation schedule
• Share and unit registers
• Loans, other liabilities and leave provisions
• Your accountant's note of the tests and the date to value at

For many Melbourne owners the business is only part of the $6 million count. The factory in Dandenong South or Campbellfield, the shop in a family trust, or a rental property owned by a connected entity can all count, and they count at market value, not cost. A property valuer values that real property; we value the business, the goodwill and the shares or units, to the same date so the figures add up. Group structures matter too: a company or trust you control at 40% or more is connected with you, so its assets come in as well. Because the test is applied just before the CGT event, the sensible time to run the numbers is before the contract is signed, while your accountant can still act on them.