When selling a business or even a partial interest, how assets are valued can significantly influence the resulting tax outcome. The Full Federal Court decision in Kilgour v Commissioner of Taxation [2025] FCAFC 183 provides important guidance on how “market value” should be determined for capital gains tax (CGT) purposes.

For business owners considering a sale, restructure, or exit, the decision is a timely reminder: valuations must reflect real commercial circumstances, not just theoretical assumptions.

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. Ownership was split as follows:

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

The transaction was conducted at arm’s length, involved extensive due diligence, and included a post-completion working capital adjustment.

The minority stakeholders (each holding 20%) sought to access the small business CGT concessions, which required their net assets to be below $6 million. To meet this threshold, they argued that their minority interests should be discounted, as smaller holdings are typically less valuable on a standalone basis.

The ATO disagreed, contending that each 20% interest formed part of a coordinated sale of 100% of the company and should therefore be valued as a proportion of the total sale price. The Court ultimately agreed with the ATO.

How the Court Approached Market Value
The Court applied the established “willing buyer, willing seller” test from Spencer v Commonwealth, but emphasised a practical, commercial approach. Two key principles emerged:

1. Commercial reality outweighs strict timing rules
   Although valuation rules often focus on a specific point in time (e.g. just before signing a contract), the Court confirmed that reasonably foreseeable outcomes cannot be ignored. In this case, the sale was effectively settled through negotiations, making the agreed price the most reliable indicator of value. 

Takeaway: Where a buyer is willing to pay a premium—whether for control, strategic advantage, or synergies—this will likely influence the valuation for tax purposes.

1. Actual transaction terms override theoretical discounts
   The taxpayers argued for a “minority discount,” but the Court focused on the real context: 

• All shareholders intended to sell together 
• The buyer sought full ownership 
• A 100% sale typically enhances the value of each individual holding 

In these circumstances, a hypothetical buyer would not demand a minority discount. Each interest effectively derived its value from the overall transaction.

Takeaway: When shareholders act collectively in a full sale, the value of individual interests may be higher than expected.

What This Means for Business Owners

• Avoid undervaluing your interest: If a buyer is pursuing control or strategic benefits, your stake may be worth more than a standard minority valuation suggests. 
• Maintain strong evidence: Records of negotiations, buyer intent, and valuation reports can be critical in supporting your tax position. 
• Plan CGT concessions early: If access to small business concessions is important, model different scenarios before entering into agreements. Ownership structures and deal timing can materially affect eligibility (subject to integrity rules). 
• Align expectations among owners: In family groups and private companies, minority stakeholders often assume their shares will be valued independently. Kilgour demonstrates that courts may instead assess value based on the transaction as a whole. 

The Bottom Line

The Kilgour decision reinforces that tax valuations must reflect commercial reality rather than theoretical constructs. 

Engaging with your tax adviser before negotiating or signing a deal can ensure valuations are robust, defensible, and aligned with your broader tax objectives.