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Passing a family business to a son, daughter or long-serving relative has to work for the founder's retirement, the successor's cash flow, the siblings' sense of fairness, the ATO and the State Revenue Office Victoria. None of those conversations can start until the business has a value.
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A succession valuation fixes the market value of a Melbourne family business, or the shares or units being handed over, on the day they pass to the next generation. Because the ATO measures a transfer between relatives at market value whatever is paid, that figure settles equalisation between siblings, what the successor can afford and any Division 152 relief.
Melbourne's family businesses cluster where the city makes and grows things: the manufacturers and food processors of the south-east belt around Dandenong South, the growers and cellar doors of the Yarra Valley, the trades and transport operators of the growth corridors. Many are run by founders within sight of retirement who would rather hand the business to a son, daughter or long-serving relative than sell it to a stranger. It is the exit that gets planned least carefully, because there is no buyer across the table pushing back on the price, and so the price is often never set at all.
That gap is where the trouble begins. The founder wants to know whether the business can fund retirement. The successor needs a business that can service whatever they are asked to pay for it. The children staying out of the business want to see that they have been dealt with fairly. And the ATO treats a transfer between relatives as though it happened at market value, whatever was actually paid. Four different questions, one number.
Until that number exists the family is negotiating on feelings. Once it exists the conversation turns practical: how much, funded how, over what period, and what the others receive instead. Sibling disputes over a family business are among the most damaging we see, and they nearly always trace back to a value that was assumed at the time rather than established, surfacing years later as a family provision claim under Part IV of the Administration and Probate Act 1958 (Vic).
We value businesses, shareholdings and unit holdings for family succession across Greater Melbourne and regional Victoria, from a Yarra Valley vineyard to a Pakenham earthmoving contractor or a Glen Waverley dental practice. The valuer fixes the market value and explains it to everyone at the table; your accountant and lawyer design the transfer around it.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Even when it feels like a gift, a family transfer is a transaction for tax, for duty and for anyone who later disputes it. The rules below all turn on value. Your tax adviser applies them; the valuer supplies the market value they are tested against.
Where relatives deal with each other, the tax law disregards what was actually paid and puts market value in its place. Handing shares across at book value, for a nominal sum or as a gift still crystallises a capital gain on the market value of what moved, and a figure that was understated can be reopened years later with shortfall interest and penalties on top.
The 15-year exemption in Division 152 was written for succession: an asset held for at least 15 years by an owner aged 55 or over who is parting with it in connection with retirement can leave the whole gain untaxed. The gateway is the $2 million aggregated turnover test or the $6 million net asset value test, both measured when the transfer happens, and the net asset test is a valuation exercise across the owner, connected entities and affiliates.
If the business is held in a private company and value passes to a shareholder or their relative for less than market consideration, Division 7A can deem the shortfall to be a dividend. Succession plans trip this rule without meaning to, through undervalued share transfers, unpaid present entitlements and family loans nobody documented.
Victoria does not impose duty on the transfer of business assets such as goodwill or plant on their own, but land is another matter. Where the family transfers the premises, or a significant interest in a company or unit trust that holds Victorian land above the threshold in the Duties Act 2000 (Vic), the State Revenue Office Victoria assesses land transfer duty or landholder duty at market value between related parties, and the SRO forms its own view of what that value is.
Superannuation runs alongside these rules. A gain sheltered by the 15-year exemption or the retirement exemption can be contributed to super under the lifetime CGT cap, outside the ordinary caps, but only if the election form reaches the fund at or before the contribution. Miss that step and the concession is generally lost for good; it is a procedural failure that cannot be repaired afterwards.
A valuation done at the moment of transfer records the position. One done well before can still change it: the value drivers can be worked on, the Division 152 tests can be met with adjustment, the handover can be lengthened and the family can talk it through before there is a deadline. The most useful succession valuations we prepare are the ones nobody is obliged to obtain yet.
The standard is market value: the price the business, or the parcel being transferred, would fetch between an informed and willing buyer and an informed and willing seller, neither under pressure. That is deliberately an outsider's number. It is not what the successor can afford, not what the founder hoped for and not the figure that would keep the siblings comfortable, though once it is on the table all three of those conversations tend to get easier.
For an established trading business, the income approach takes the lead. Future maintainable earnings are capitalised at a rate that reflects the risk of those earnings continuing once the founder steps back, and that qualification is the whole question in succession. When the customers, supplier terms, licences or technical know-how belong to the founder personally, part of the earnings will not survive the handover, and the valuation has to separate the goodwill that transfers from the goodwill that walks out of the door. A Dandenong South engineering business whose largest customers deal only with the founder is a different proposition from one where the successor has run the floor for a decade.
The market approach tests the result against what comparable businesses have sold for, which also tells the family what a sale to an outsider would realistically bring in as the alternative. The asset approach sets the floor, and for a Yarra Valley vineyard, a Gippsland dairy or any business that owns its premises it is often the number that matters most, because the land may be worth several times the business that trades on it.
These are the patterns we meet when a family transfer reaches us after the event, usually because the business is being sold or the estate is before the Supreme Court of Victoria.
The right depth depends on who will rely on the figure and how likely it is to be examined later. A founder testing whether retirement is affordable needs a clear internal view first. Once the value prices the transfer, supports a Division 152 position or settles what each child receives, it has to be certified.
The report sets out the purpose, the standard and premise of value, the valuation date and the information relied on. Each normalisation adjustment is listed with its reason. The report explains how founder dependency was assessed and what it did to the value, traces the capitalisation rate and any multiple to named sources, and reconciles the approaches to a range with the weighting explained in plain words. Where control, a minority parcel or a staged tranche changes the answer, each is valued separately so the family can see the whole picture at once.
Related-party transfers get examined later, sometimes a decade later, when the business is sold or the estate is contested in the Supreme Court of Victoria. The report is written to be read cold by someone who was never in the room. It is signed by a certified valuer who will explain it to your accountant, your lawyer and the family, and who will defend it if the ATO, the SRO or another expert challenges it.
If one of my children contests this transfer in ten years, will this report still explain why the number was right on the day? If the answer relies on anyone's memory, the valuation has not done its job.
Talk your situation through with a certified valuer before you commit to anything, at no cost.