The case in one paragraph
In Moloney and Commissioner of Taxation [2024] AATA 1483 (7 June 2024), a family trust had sold its shares in the family company to a related entity as part of an internal restructure, at a price of about $3.5 million supported by a valuation from the family's accounting firm. The ATO took the view the parties were not dealing at arm's length, engaged its own expert, and substituted a market value of around $10.6 million — which, among other consequences, would have pushed the group over the $6 million maximum net asset value (MNAV) threshold and stripped the small business CGT concessions from the sale. At the tribunal, each side ran expert valuation evidence. The tribunal agreed the dealing was not at arm's length, so the market value substitution rule applied — and then preferred the taxpayer's expert, whose valuation of roughly $3 million kept net CGT assets under $6 million. The concessions survived, the assessable gain fell away, and no penalties were imposed.
The whole case was a fight about the multiple
Strip away the procedure and Moloney was an argument about a single input. The ATO's expert capitalised earnings at a multiple of roughly 5.5–6.0. The taxpayer's expert used roughly 3.75–4.25. Same business, same earnings base, wildly different conclusions — which is exactly why 'get a valuation' is not the same as 'get a defensible valuation'. The tribunal preferred the lower multiple because it better reflected the market reality of the asset actually being valued: an interest in a private, unlisted company with a concentrated geographic footprint and unexciting profit outlook, which a real buyer could not exit through any liquid market. A multiple that would be defensible for a diversified, scalable acquisition target was not defensible for this business.
What the tribunal's reasoning rewards
- ·Market realism over mechanical benchmarks — the winning valuation priced the business a real purchaser would actually buy, illiquidity and concentration included, rather than importing multiples from stronger businesses
- ·Engagement with the specific facts — geographic reach, customer base and the profit outlook at the valuation date all shaped the multiple, and the expert could show why
- ·Transparent workings — the tribunal could follow the reasoning from evidence to conclusion, which is what let it prefer one expert over the other rather than splitting the difference
- ·Contemporaneous support — the taxpayers had obtained a professional valuation at the time of the transaction, not reconstructed one after the ATO came asking
Related parties: the substitution rule is not the loss
One misreading of Moloney is that the taxpayers 'got away with' a related-party price. They did not — the tribunal found the dealing was not at arm's length, and the market value substitution rule in the CGT provisions applied exactly as the ATO said it should. What the taxpayers won was the question of what the market value actually was. That distinction matters for anyone restructuring: transacting with a related entity all but invites the substitution rule, and at that point your protection is not the contract price. It is the quality of the market valuation evidence standing behind it.
The penalties lesson is quietly the most valuable one
No penalties were imposed, even though the ATO's primary position implied a large understatement. The taxpayers had relied on a professional valuation obtained at the time and had disclosed the transaction openly — the kind of conduct the safe harbour and reasonably-arguable-position rules exist to protect. Compare the counterfactual: the same restructure at the same price with no contemporaneous valuation, unwound years later at ATO review. The primary tax outcome might have been arguable either way, but the penalty exposure would have looked entirely different. A signed, contemporaneous, independent valuation is cheap insurance against the part of a tax dispute that is genuinely discretionary.
What this means if you are relying on the $6m MNAV test
The maximum net asset value test is measured at the market value of the net CGT assets of the entity, its connected entities and affiliates just before the CGT event — and Moloney shows both edges of that sword. The ATO can and will commission its own valuation and substitute a number nearly three times yours; and a taxpayer with disciplined, market-realistic expert evidence can beat that number at the tribunal. If your eligibility sits anywhere near the threshold, the time to build that evidence is before the event, at a level of rigour that anticipates review. That is precisely the work Oliver Group's Defensible Valuation File tier (from $8,995 + GST) exists for — three methodologies, scenario analysis and a full evidence pack, with the working file retained for 10 years. Oliver Group is an independent valuer, not a registered tax agent; your tax adviser applies the concession law to the number we establish.