- Market value is the price a willing but not anxious buyer and seller would agree, both well informed, in an arm's length deal.
- It is tied to one date and uses only what was known or reasonably foreseeable at that date.
- It reflects the asset's highest and best use, and ignores value that only one particular buyer would pay for.
- Market value is not the price you paid, the book value, or what you hope to get.
- The ATO's guidance says acceptability usually depends on the valuation process followed rather than who conducted it.
Why market value matters for CGT
Most of the time, CGT is worked out on real numbers: what you paid and what you received. But many rules use market value instead. Common examples:
- gifting shares or a business to family, or selling at a price that is not at arm's length
- the small business CGT concessions, where the $6 million maximum net asset value test uses market values
- inheriting a business or shares, and some dates linked to a death
- ceasing to be an Australian resident
- the new rules that split a gain at 30 June 2027
Listed shares have a price on the exchange. A private business does not. Someone has to work it out.
The definition in plain words
The tax law does not give one definition of market value for every purpose. The ATO's guidance says that, unless a provision says otherwise, it takes its ordinary meaning from the courts and from international valuation standards.
The core idea comes from an old High Court case. Picture a sale between a buyer and a seller who are:
- willing but not anxious. Neither is forced to deal, and neither is desperate.
- well informed. Both know the good and bad points of the business, and the state of the market.
- at arm's length. No family tie or special relationship affects the price.
- acting sensibly. Each pushes for the best price they can reasonably get.
The market value is the price those two people would agree on the valuation date, after the business had been properly offered for sale.
Three ideas that follow
It is tied to one date
Markets change. A value at 30 June 2020 can be very different from a value at 30 June 2027. The ATO's guidance says the value must be based on what was known, or could reasonably be foreseen, at the valuation date. Hindsight is not allowed. If a major customer left a year later, and nobody could have seen it coming, that does not reduce the earlier value.
Highest and best use
Market value reflects the use of the asset that a market buyer would have in mind: the use that is possible, legal and financially sensible. For most operating businesses that is simply carrying on the business. Sometimes a business is worth more for its assets than as a going concern, and the valuer should say so.
No special buyer
Market value ignores extra value that only one particular buyer would pay for. A competitor who could cut costs by merging might pay more. A typical buyer would not. Market value assumes a typical buyer.
What market value is not
- Not the price you paid. Cost is history. Market value is a fresh look at a date.
- Not book value. Accounts usually leave out internally built goodwill.
- Not a rule of thumb. "Three times profit" is not a valuation.
- Not what you want it to be. An independent valuation is not built to produce a high or low number. It sets out the most supportable figure from the evidence.
What the ATO's guidance expects
The ATO publishes guidance on market valuation for tax purposes. In general terms it expects:
- a valuation specific to the tax rule it is used for
- a recognised method that suits the asset, with reasons, and a cross-check where possible
- inputs and assumptions stated openly and supported by evidence
- records good enough for another valuer to follow the work and reach the same answer
- a report that covers set items, including the purpose, the asset, the date, the method and the valuer's independence
The ATO says the acceptability of a valuation usually depends on the valuation process followed rather than who conducted it. It decides for itself whether to accept a valuation. It also says the onus stays with the taxpayer, even when a professional is engaged. See who can do a CGT valuation.
How a business is valued
A valuer usually starts from the earnings a buyer could rely on, adjusted for one-off items and market-rate owner wages, and applies a multiple or rate that reflects the risk. Market evidence for similar businesses supports the choice. Then debt, surplus cash and non-business assets are added or taken away to reach the value of the business or the shares.
What the valuation report covers for this purpose
- the asset or interest, the owner, the date and the CGT purpose
- market value as the standard of value, defined in the report
- the method, the reasons for it, and a cross-check
- earnings, adjustments, evidence, assumptions and limitations
- the signature of the valuer responsible
What we need from you
- what is being valued, the date, and why
- financial statements for the years before the date
- ownership documents: share register, trust deed or partnership agreement
- anything that shows the business's position at the date
Get a fixed fee
Our fee for a signed CGT market valuation is fixed by the business's annual revenue, from $1,495 + GST for revenue under $1 million. See pricing or choose your revenue band below.
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.