Valuing a partnership interest for CGT

• Capital gains and losses from partnership assets are made by the partners individually, not by the partnership.
• Each partner has a separate cost base for their interest in each partnership asset, including goodwill.
• A partner's share is worked out under the partnership agreement, or partnership law if there is no agreement.
• When a partner leaves or joins, the remaining partners can acquire new interests in the assets, so values at that date matter.
• Your accountant or tax adviser decides how the CGT rules apply to each partner; we value the business and the interests.

How CGT sees a partnership

For accounting, a partnership looks like one business. For CGT, it is a group of partners who each own part of each asset.

The tax law says:

• any capital gain or loss from a CGT event involving a partnership or one of its assets is made by the partners individually
• each partner's gain or loss is worked out under the partnership agreement, or partnership law if there is no agreement
• each partner has a separate cost base for their interest in each partnership asset
• an interest in a partnership asset, and an interest in a partnership itself, are CGT assets

So when a partner sells out, retires, gifts part of their interest or brings in a new partner, the question is the market value of their share of each relevant asset, and above all their share of the goodwill.

Each partner's share of each asset

Partners do not always share every asset the same way. The law gives an example: a partner who contributed land may hold 75% of that land under the agreement, while sharing other assets equally.

The valuation follows the partnership agreement:

• profit and capital shares, which may differ from each other
• specific assets contributed by, or held for, particular partners
• goodwill clauses, which may say whether retiring partners are paid for goodwill and how
• retirement and admission terms, including any formula price
• capital accounts and current accounts, which are separate from the market value of the assets

If there is no written agreement, the state partnership law fills the gaps. That is a legal question for your lawyer or adviser, and the valuer works from their instructions.

How the value is built

1. Value the business as a going concern, usually on maintainable earnings, with each partner's work in the business costed at a commercial wage so that profit is not overstated.
2. Split the value by asset, at least into goodwill and identifiable assets such as plant, work in progress and debtors, less liabilities.
3. Apply each partner's share of each asset under the agreement.
4. Consider the interest itself, where the purpose calls for it: restrictions on transfer, the partner's role, and what a buyer of that interest could actually receive.

Partner-dependent goodwill

In many professional and trade partnerships, clients follow particular partners. The ATO's goodwill ruling says goodwill that comes from a person's own personality, skills or reputation is not transferable when they leave. The valuation looks at how much of the goodwill would stay with the business if a particular partner left. See goodwill valuation for CGT.

When partners change

When a partner leaves and the remaining partners take over the departing partner's share, each remaining partner acquires a separate new interest in each asset, to the extent of the share they take. That new interest has its own cost base and acquisition date. Values at the date of the change are useful for the partner leaving and for those staying.

Related points your adviser may also consider: whether the small business CGT concessions apply to a partner, and whether a value at 30 June 2027 may be useful for partners who are individuals or trusts.

What the valuation report covers for this purpose

The report identifies the partnership, the partners whose interests are valued, the valuation date and the purpose. It sets out the standard of value (market value), the method and earnings (including how partners' work was costed), the split between goodwill and other assets, each partner's share under the agreement, any adjustment for the interest itself and its reasons, market evidence, assumptions and limitations. It is signed by the valuer responsible. We follow the APES 225 guidelines on valuation services.

What we need from you

• the partnership agreement and any variations, or a note that there is none
• partnership financial statements and tax returns for three years
• each partner's role, hours and drawings
• an asset list, including work in progress and debtors
• partners' capital and current accounts at the valuation date
• client or customer summaries, showing which partner manages which relationships

Get a fixed fee

The fee is fixed by the annual revenue of the partnership's business, starting at $1,495 + GST for revenue under $1 million. If values are needed for several partners or at more than one date, ask us for a fixed quote before we start.

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.