- The tax law treats goodwill as a CGT asset, and the ATO's ruling says the goodwill of a business is a single asset.
- Goodwill is valued as what the business is worth as a going concern, less the value of its identifiable assets, not as a separate amount added on top.
- Goodwill is an example of an asset inherently connected with a business, which matters for the active asset test in the small business CGT concessions.
- Goodwill that comes from an owner's own skills or reputation may not transfer to a buyer, which affects its market value.
- Your accountant or tax adviser decides how goodwill is treated in your return; we value it independently.
What goodwill is for CGT
Goodwill is the extra a buyer would pay for a business because it already works: customers come back, staff know the job, suppliers give terms, the phone rings. It cannot be sold on its own. It exists only with the business it belongs to.
The tax law names goodwill as a CGT asset. The ATO's ruling on goodwill adds some practical points:
- the goodwill of a business is one CGT asset, whatever its sources
- so-called site goodwill, personal goodwill and name goodwill are not separate CGT assets
- goodwill is separate from the other assets of the business, such as plant, licences, contracts, trade marks and other intellectual property
- the cost base of goodwill you built yourself does not include ordinary working expenses of the business
Why its value matters for CGT
Goodwill's market value turns up in several CGT questions:
- Selling a business. The price may need to be split between goodwill and other assets. See selling a business.
- The small business CGT concessions. The maximum net asset value test uses market values, and goodwill can be the largest item. See the MNAV test.
- Gifts and related party transfers. Where a business moves between family or related entities, market value usually replaces the price.
- 30 June 2027. For individuals and trusts that own a business directly, the value of its goodwill may be relevant under the new rules. A valuation may be useful; it is not required. See the 30 June 2027 valuation.
Goodwill and the active asset test
The small business CGT concessions generally require the asset to be an active asset. Under the definition in the tax law, an intangible asset you own that is inherently connected with a business carried on by you, your affiliate or a connected entity can qualify, and goodwill is the example the law gives. Whether your goodwill passes is a question for your accountant or tax adviser.
How goodwill is valued
Goodwill is normally valued indirectly:
- Value the whole business as a going concern, usually by capitalising its maintainable earnings, with cross-checks to market evidence.
- Work out the market value of the identifiable assets the business uses: plant, vehicles, stock, debtors and so on, less the liabilities that go with the business.
- The difference is goodwill.
Adding a goodwill figure on top of an earnings-based value would count the same profit twice. A good report shows the arithmetic both ways.
Earnings are adjusted first
Before earnings are capitalised, they are normalised. The most important adjustment in a small business is usually the owner's pay. If the owner draws $60,000 but a manager would cost $140,000, the earnings a buyer can expect are lower than the accounts suggest, and so is goodwill.
Personal and business goodwill
The ATO's ruling explains that when a sole practitioner sells, the part of the goodwill that comes from their personality, reputation, skills or attributes is not transferable. Other sources, such as the location, systems, brand, staff and contracts, keep drawing customers after the owner leaves, and that part can be sold.
So the valuer asks practical questions:
- How many customers deal only with the owner?
- Is the work booked through systems, or through the owner's mobile?
- Who holds the licences, and in whose name?
- Would key staff stay with a new owner?
Strong owner dependence usually lowers the market value of goodwill. It does not make it zero if other sources stand on their own.
What the valuation report covers for this purpose
The report identifies the business, the owner and the valuation date, and the purpose. It states the standard of value (market value), the method, the maintainable earnings and every adjustment, the capitalisation rate and its support, the identifiable assets deducted, and the resulting goodwill figure. It covers owner dependence, market evidence, assumptions and limitations, and is signed by the valuer responsible. We follow the APES 225 guidelines on valuation services.
What we need from you
- financial statements and tax returns for three years
- management accounts for the current year
- an asset register, or a list of plant, vehicles and equipment
- what the owner does in the business, and what they are paid
- a customer summary: how many, top customers' share, recurring work
- leases, licences and key contracts
Get a fixed fee
The fee is fixed by the annual revenue of the business, starting at $1,495 + GST for revenue under $1 million and $1,995 + GST for $1 million to $2 million. Use the price tool below, or see pricing for every band.
General information only, current at 10 November 2026. We value businesses and business interests; we do not give tax advice. Your accountant or tax adviser decides whether a rule applies to you.