What did Kilgour v Commissioner actually decide?
The short answer: you cannot successfully argue that shares you sold were worth less than the price you actually received for them, when that price was struck at arm's length as part of a coordinated sale of the whole company. In Kilgour v Commissioner of Taxation [2025] FCAFC 183, the Full Federal Court (Charlesworth, O'Sullivan and Horan JJ) dismissed an appeal by two family trusts who had each received $6.2 million for their 20% shareholdings in Punters Paradise Pty Ltd, and who contended that the market value of each parcel — the figure their CGT concession eligibility turned on — was lower than that. The court held the dealing was at arm's length, reaffirmed the classic Spencer willing-buyer/willing-seller standard, and found the negotiated consideration was the most reliable evidence of market value. The decision was handed down on 12 December 2025, and the High Court has since refused the taxpayers special leave to appeal, so it stands.
What happened in the Punters Paradise sale?
Punters Paradise Pty Ltd operated the Punters.com.au business. It had three shareholders: two family trusts holding 20% each, and a third shareholder holding 60%. All three vendors together sold 100% of the company to News Corp Investments for $31 million under a single share sale agreement, with each trust receiving $6.2 million for its 20% parcel. The dispute was not about the deal itself — the Full Court ultimately held the parties were dealing with each other at arm's length. It arose afterwards, when the trusts' eligibility for CGT concessions came to turn on the market value of the shares they had disposed of. That question — what were the shares actually worth at the date of disposal — is a valuation question, and it became the battleground of the case.
Why would anyone argue their shares were worth less than the price received?
It sounds backwards, but the incentive is real. Several CGT concessions hinge on value-based thresholds — the $6 million maximum net asset value test is the familiar example — so a lower market value at the disposal date can be the difference between qualifying and not. The trusts' argument followed orthodox valuation logic in the abstract: a hypothetical buyer of a standalone 20% parcel gets no control over the company, no ability to force a sale or a dividend, and would demand a minority discount against a proportionate share of full value. Apply that discount and each parcel is worth less than $6.2 million. The flaw was that these parcels were not standalone. Each was sold at the valuation date as part of a coordinated 100% exit that was practically certain to complete — and a valuation exercise that ignores that fact is answering a different question from the one the law asks.
What is the market value substitution rule, and why didn't it help?
The CGT rules include a market value substitution rule: broadly, where parties do not deal at arm's length, actual proceeds can be replaced with the asset's market value. One limb of Kilgour asked whether that rule was engaged. The Full Court held it was not — the sale to News Corp Investments was a genuinely negotiated, arm's-length dealing, so there was no basis to rewrite the $6.2 million each trust received. That pushed everything onto the second limb: the direct question of what the shares were worth at the disposal date, which is what the concession eligibility tests actually asked. And on that question the actual price did the damage, not the rule. The substitution rule exists to correct prices distorted by non-arm's-length dealings; it is not a route to a number more convenient than the one an open-market negotiation produced.
How did the Full Court apply the Spencer test?
The court went back to Spencer v The Commonwealth (1907), the foundation of Australian valuation law: market value is the price a willing but not anxious buyer would pay a willing but not anxious seller, each acting with knowledge, in a hypothetical negotiation. Crucially, the Full Court reaffirmed that this hypothetical bargain is anchored in the actual circumstances at the valuation date — a valuer cannot disregard circumstances that were in contemplation at that date. Here, completion of the coordinated 100% sale was a practical certainty when the shares were disposed of. The hypothetical buyer of a 20% parcel was therefore not buying a stranded minority stake in a private company; it was buying a parcel that formed part of a whole-of-company exit already struck at $31 million. You cannot value away from a price you actually achieved: once completion of your own coordinated sale is practically certain, the negotiated consideration becomes the most reliable evidence of market value, not an inconvenient data point to be discounted.
Are minority discounts dead after Kilgour?
No — and Kilgour should not be read as saying minority interests are always worth their proportionate share of company value. The decision is about context. A genuine standalone minority parcel — one shareholder selling 20% into an uncertain market, with no control, no guaranteed exit and no coordinated transaction in sight — can still support a properly evidenced minority discount, and valuers apply them routinely. What Kilgour forecloses is the automatic discount: treating 'minority parcel' as a label that mechanically produces a lower number regardless of what was actually happening at the valuation date. A 20% holding sold inside a coordinated 100% exit is not the same asset, economically, as a 20% holding with no exit in view, and the court refused to pretend otherwise. The discount question is always: what would the hypothetical buyer, knowing what was known and contemplated at that date, actually pay for this parcel in these circumstances?
How does Kilgour sit alongside the Moloney decision?
We have written separately about Moloney, where taxpayer valuation evidence prevailed over the Commissioner's figure in a maximum net asset value dispute. Read together, the two cases are two sides of the same principle. Moloney shows that market value is an evidence question the taxpayer can win: a rigorous, well-documented valuation can beat the ATO's number. Kilgour shows the same principle cutting the other way — the evidence includes your own completed transaction, and no model, however elegant, easily outruns a real price struck at arm's length at the valuation date. Neither case makes market value whatever the ATO says, and neither makes it whatever your expert says. Both make it what the evidence best supports. For business owners, the combined message is that valuation positions are built or lost on evidence gathered at the right time — not on advocacy after the fact.
What does Kilgour mean for the small business CGT concessions?
Several small business CGT concessions depend on value thresholds, and the maximum net asset value test — with its $6 million ceiling — is where market value disputes most often land. Kilgour draws a hard practical line: if your eligibility depends on the market value of what you sold being lower than the price you actually received for it, you are arguing against your own transaction, and that position needs extraordinary evidence to survive. Usually it will not. In a coordinated exit, the disposal-date value of each parcel is, for practical purposes, the price the deal delivered for it. That does not put the concessions out of reach for business sellers — it means the value question has to be confronted honestly and early, using the transaction as evidence, rather than explained away afterwards.
What are the practical lessons for business owners?
- ·Minority discounts are context-dependent, not automatic. A 20% parcel sold inside a coordinated 100% exit is not a standalone minority interest, and valuing it as one invites exactly the result the Kilgour trusts got.
- ·The actual transaction is usually the best evidence of market value at that date. A model that contradicts a real, arm's-length price has to explain the price away — and courts are reluctant to let it.
- ·Circumstances in contemplation at the valuation date count. If completion of your sale is a practical certainty, the hypothetical buyer is taken to know it.
- ·A position that depends on market value being lower than your own sale price — for example, squeezing under the $6 million maximum net asset value ceiling — needs extraordinary evidence and usually fails.
- ·Get the valuation analysis before you sign, while deal structure and timing can still respond to what the numbers show. After completion, the price is evidence — and it is evidence against you.
Where does an independent valuation fit in?
Oliver Group prepares independent, signed business and share valuations on fixed fees, prepared with the ATO's market valuation guidance in mind. Where a sale is in prospect and a value threshold matters, an Indicative Snapshot from $990 +GST (around 5 business days) gives an indicative range early — it is not a signed report, and the fee is fully creditable toward an Essential valuation from $1,495 +GST (signed, 10-14 business days). Where the position is likely to be examined closely, the Defensible Valuation File from $8,995 +GST (25-35 business days) is built for scrutiny, and we also provide second-opinion reviews of existing valuations. To be clear about our role: we are independent valuers only. We are not registered tax agents and give no tax, legal or financial advice — whether a concession is available, and how Kilgour bears on your position, stays with your accountant or adviser. If you were referred by an accountant or lawyer, a 10% discount applies.