When selling a business or even a slice of one how you value the assets involved can have a major impact on the tax bill. A recent Full Federal Court decision, Kilgour v Commissioner of Taxation [2025] FCAFC 183, offers timely guidance on how “market value” is really determined for capital gains tax (CGT) purposes.

When preparing for transactions, restructures or potential exit events, the case is a useful reminder: valuations must reflect real commercial conditions, not just theoretical models.

What happened?

In 2016, three family trusts sold 100% of the shares in Punters Paradise Pty Ltd, an online wagering business, to News Corp for approximately $31 million. The ownership split was: 

• Pettett Trust – 60%
• Kilgour Family Trust – 20%
•  Reuhl Family Trust – 20%

The sale was negotiated at arm’s length, involved extensive due diligence, and included a working-capital adjustment after completion.

The minority beneficiaries (20% holders) sought to use the small business CGT concessions, which in this case required the seller’s net assets to be below $6 million. To fall below the threshold, they argued their 20% minority interests should be heavily discounted in value—because a small holding is usually worth less on a standalone basis.

The ATO disagreed, saying each 20% parcel formed part of a coordinated 100% sale and should simply be valued as 20% of the final $31 million deal price.

The Court agreed with the ATO.

How the court approached market value

The Court applied the long-standing “willing buyer/willing seller” principles from Spencer v Commonwealth, but with a modern, commercial twist. Two practical messages emerge:

1. Real-world expectations matter more than rigid valuation dates

Although the tax rules in this area require looking at value “just before” signing the sale contract, the Court said you cannot ignore things that were reasonably predictable at that point. Here, the sale was essentially locked in through negotiations, so the final agreed price was the best evidence of market value.

Practical takeaway: If a purchaser is clearly willing to pay a premium for control, synergies, strategic value or expansion opportunities, those factors will likely shape the valuation for tax purposes.

2. Actual deal terms beat theoretical discounts

The taxpayers tried to argue for a typical “minority discount”. However, the Court said the real commercial context matters more:

• All shareholders intended to sell together.
• The buyer wanted all the shares, not bits and pieces.
•  A coordinated, 100% sale typically lifts the value of each parcel.

Because of that, the hypothetical buyer would not insist on a discount. The minority interests effectively rode on the value of the full-stake sale.

Practical takeaway: When shareholders act collectively, the tax valuation of each interest can increase, sometimes significantly.

What this means for business owners

• Don’t undervalue your stake - If the buyer is pursuing synergies or control, your interest might be worth more than a textbook minority valuation suggests. Make sure your advisers consider the wider commercial picture.
•  Evidence is everything - Keep thorough records such as negotiations, emails, valuations, buyer motivations. These can be powerful in supporting your tax position and accessing concessions.
• Plan CGT concession eligibility early - If you’re relying on the small business concessions, test different deal scenarios before signing any contracts or other paperwork, including a heads of agreement. Sometimes restructuring ownership or staging a sale can make a material difference, but integrity and anti-avoidance rules in the tax system still need to be considered carefully.
• Align shareholder expectations - In family groups and private companies, minority owners often assume their shares will be valued as a standalone piece. Kilgour shows that courts will often look at the transaction as a whole and not each slice in isolation.

The bottom line

Kilgour reinforces that valuations for tax purposes work best when they reflect the real commercial world, not theoretical models. Before you sell, restructure or negotiate with a potential buyer, involve your accountant early. A well-supported valuation can mean the difference between accessing valuable CGT concessions or missing out.