Maximise profitability, remove bad news ahead of the CGT valuation timeline

With insolvencies in 2025–26 above the long-term average, one valuation specialist said the depressed valuation market reinforces the importance of business owners focusing on profitability and raising their business value amid looming CGT valuation requirements on 1 July 2027.

“The worst thing from a business ownership point of view is that valuations are depressed at the moment,” Simon James (pictured), assurance and advisory partner at HLB Mann Judd, told Accounting Times.

“It’s not pretty out there; insolvency rates are at a record high this quarter. In terms of valuations, it’s sort of a depressed valuation market at the moment, which kind of plays into the government’s hands to set low valuation benchmarks for businesses and properties as well.”

He said that it is most important for business owners to start preparing for valuation early and increasing their business valuation.

“Maximising values is critical, and for non-CGT assets – same type of thing, if you can support that higher valuation of your business, it ultimately will save you some tax in the long run – it’s a material amount,” he said.

“So it’s about understanding the valuation piece, maximising the value, and then documenting the value. It’s an iterative process over the next nine months.”

“Start early, work with your advisers to do that and make sure that it is documented properly, because at some point in the future, when you sell your business, the Tax Office will want to know what amount of gain is taxed at the higher rate and what amount is taxed at the lower rate, and having that documentation that supports your valuation is going to be critical.”

For James, owners should ensure that they get rid of their business’s “bad news” before seeking a valuation.

“What you don’t want to be doing is taking any bad news into FY27 that you don’t need to. For example, if you’ve got some debtors in FY26 that are doubtful, make sure you provide for them in FY27; otherwise, they’re going to hit your profit numbers FY27, which is not necessarily good news from a valuation point of view,” he said.

“For any people [who] have got a bit lazy on the business and not really driving the business profitability as much as they should or could have, now is the time to act because this is just a one-off benchmark hit. Get your house in order, get working on it now; you’ve got nine months to do something about it.”

“It’s really understanding what drives the business, and whether we are maximising everything we can do there.”