When a client comes to me in the middle of a business sale, one of the first questions I ask is: “Have you thought carefully about how your interest is being valued?” It sounds like a simple question, but the answer can mean the difference between a very comfortable tax outcome and a very uncomfortable one.
A recent Full Federal Court decision – Kilgour v Commissioner of Taxation [2025] FCAFC 183 – has given all of us in the accounting profession a timely reminder of just how important that question really is. If you’re planning to sell a business, restructure ownership, or negotiate an exit at any point, this case is worth understanding.
What Actually Happened in the Kilgour Case
In 2016, three family trusts sold 100% of the shares in an online wagering business, Punters Paradise Pty Ltd, to News Corp for approximately $31 million. Two of the trusts each held a 20% minority stake, while the third held 60%.
The minority shareholders wanted to access the small business CGT concessions. To do that, they needed to show their net assets were below the $6 million threshold. Their argument was that a 20% minority interest should be heavily discounted in value – because a small stake in a business is typically worth less on a standalone basis than a proportional slice of the whole.
The ATO pushed back. Its position was that each 20% parcel should simply be valued as 20% of the final $31 million deal price, because all three shareholders were selling together as part of a coordinated 100% transaction.
| The Full Federal Court agreed with the ATO. |
Why the Court Reached That Decision
The Court applied the well-established “willing buyer/willing seller” test from Spencer v Commonwealth, but applied it to the real commercial facts at hand rather than a theoretical scenario.
There are two practical principles I want to draw your attention to here.
Real-world context matters more than a rigid valuation date
The court said you cannot pretend a sale isn’t happening when valuing an asset for CGT purposes – at least not when the outcome was clearly foreseeable. The sale to News Corp was well advanced. The final agreed price was the best available evidence of what a willing buyer would actually pay. So even though the tax rules require you to look at value “just before” the contract is signed, the court said you have to account for what was reasonably predictable at that point.
| Practical takeaway: If a purchaser is clearly willing to pay a premium for control, synergies, or strategic value, those factors will likely shape the valuation for tax purposes. |
Actual deal terms beat theoretical discounts
The taxpayers argued for a standard minority discount, which is entirely sensible in many situations. But the court looked at the facts: all three shareholders intended to sell together, the buyer wanted 100% of the shares, and the coordinated nature of the sale lifted the effective value of each parcel. Because of that, a hypothetical buyer would not have insisted on a discount, because they knew the whole package was available.
| Practical takeaway: When shareholders act collectively, the tax valuation of each interest can increase – sometimes significantly. |
What This Means for You
If you own part of a business and you’re planning a sale, a restructure, or even just thinking about your exit strategy down the track, there are a few things I’d encourage you to consider.
The first is not to assume your minority stake will be valued in isolation. Courts and the ATO will look at the transaction as a whole. If you’re selling alongside other shareholders and the buyer is acquiring full control, your slice may be valued much closer to a proportional share of the whole business price than you might expect. That affects your eligibility for concessions.
The second is that documentation matters enormously. The court in Kilgour had a rich evidentiary record to work with -negotiations, buyer motivations, due diligence materials. If you’re relying on a particular valuation approach for tax purposes, you need to be able to support it. Keep a thorough paper trail from the beginning of any sale process.
The third, and perhaps most important, is that CGT concession eligibility should be tested before you sign anything. Once heads of agreement are on the table, your options narrow significantly. Different ownership structures, different timing, different transaction staging – all of these can affect your position. But they need to be considered carefully and with an eye on the integrity and anti-avoidance provisions in the tax legislation. There are no quick fixes here, just thoughtful planning.
And finally, if you’re part of a family group or private company with multiple shareholders, make sure everyone’s assumptions are aligned. Minority owners often assume their shares will be valued differently from the majority holding. Kilgour shows that where shareholders act collectively in a sale, the tax treatment can look quite different from what anyone expected.
A Note on Planning Ahead
Cases like Kilgour serve as a useful reminder that the tax system rewards careful, early planning. I’ve seen firsthand how a conversation held three or four months before a transaction can open up genuine options. That same conversation held the week before settlement often can’t achieve much at all.
If you’re thinking about selling a business – whether that’s this financial year or several years from now – I’d encourage you to come and have a chat. We can look at your current ownership structure, consider how your net assets sit relative to the relevant thresholds, and identify anything worth addressing well before any deal is on the table.
At TSP, we’ve been helping business owners in Newcastle and the Hunter Valley navigate transactions, restructures, and succession for over 43 years. This is exactly the kind of work we love – the planning that protects your financial position before the pressure is on.
| Ready to talk through your situation? Call us on 4926 4155 or email ad***@****************om.au to book a consultation with Deidre or one of the TSP team. |
Frequently Asked Questions – Capital Gains Tax
What is the Kilgour v Commissioner of Taxation case about?
The Kilgour case involved a Full Federal Court decision in 2025 regarding how minority shareholdings should be valued for CGT purposes when sold as part of a coordinated 100% business sale. The court agreed with the ATO that minority discounts were not appropriate given the commercial reality of the transaction.
Can I still apply a minority discount when valuing shares for CGT?
It depends on the circumstances. A minority discount may be appropriate where a shareholder genuinely sells their stake independently and the buyer is not acquiring full control. Where shareholders sell together as part of a single transaction, the court has indicated the commercial reality of that arrangement will take precedence over a theoretical standalone valuation.
How does this affect access to small business CGT concessions?
The small business CGT concessions have net asset thresholds, so if a minority interest is valued without a discount, your net assets may exceed the eligibility threshold. This is why it is important to test your eligibility before entering into any transaction or signing any agreement.
When should I involve my accountant in a business sale?
As early as possible — ideally before any heads of agreement are signed. The earlier you plan, the more options you have to consider. By the time contracts are being finalised, the window for meaningful tax planning is significantly reduced.
Does the Kilgour decision apply to all business sales?
The decision is most relevant where multiple shareholders are selling together and a buyer is acquiring full control. Each situation has its own facts, and the appropriate valuation approach should be assessed by a qualified accountant in the context of your specific circumstances.
What records should I keep during a business sale process?
You should retain all correspondence relating to negotiations, any valuations obtained, documents evidencing buyer motivations, due diligence materials, and any working capital or completion adjustments. Thorough records support your tax position and provide evidence for any valuations you rely on.
When not at work, Deidre enjoys spending time with her husband and two children, as well as indulging in audiobooks and coffee.
Areas of Expertise:
✅ Business structuring & compliance
✅ SMSF strategy & auditing
✅ Tax planning for individuals & businesses
📧 deidrem@tspaccountants.com.au