Putting a holding company over your company: when a valuation is needed, and who does it
See which roll-overs compare market values, when values are measured, and the fixed fee.
A business valuer values the shares or units in a holding company restructure, and a valuation may be needed because several roll-over rules compare market values. Under Division 615, for two or more owners, each owner's share of total market value must be the same before and after the restructure (section 615-20). Oliver Group charges from $1,495 + GST.
What is a holding company restructure, and why do owners do it?
A holding company restructure puts a company on top of an existing company or unit trust, for reasons such as protecting assets, preparing for a sale, bringing in investors or holding property apart from the trading business. The owners swap their shares or units for shares in the interposed company, which then owns the original entity; the term also covers moving a business or shares into a group.
Do I need a valuation to put a holding company over my company?
A valuation can be needed. Division 615 and Subdivision 122-A of the Income Tax Assessment Act 1997 can each apply and both turn on market values; without a roll-over, the market value substitution rules in sections 116-30 and 112-20 can apply. Division 615 needs you and at least one other entity to own all the shares or units and swap them for shares in the interposed company and nothing else (section 615-5), and each owner's share of total market value must be the same before and after (section 615-20). The choice of roll-over is your adviser's.
Which roll-overs can apply, and when are values measured?
Division 615 fixes the moments at which values are compared. For the other roll-overs the Act names the event but no valuation time, so your adviser confirms the date.
| Roll-over option | What usually has to be valued | The date |
|---|---|---|
| Division 615: a company interposed over a company or unit trust with two or more owners | Each owner's old shares or units and new shares, to compare each owner's share of total market value | Old interests: just before the first is disposed of, redeemed or cancelled. New shares: just after the completion time |
| Subdivision 122-A: an individual or trustee moves a CGT asset, or a whole business, into a company they wholly own | What is moved, less liabilities taken on, and the shares received: their market values must be substantially the same | Not fixed by section 122-20(3). The trigger event (for a disposal, CGT event A1) happens when the contract is made, or if there is no contract when ownership changes (section 104-10(3)). Your adviser confirms the date |
| Subdivision 124-M (scrip for scrip): a company ends up with 80% or more of another company's voting shares | If the parties did not deal at arm's length and both companies had fewer than 300 members (or a linked group rule applies), what each holder receives must be worth at least substantially the same as their shares. Unavailable if Division 122 or 615 can be chosen | Not fixed by section 124-780(5). The 300-member and linked-group tests look at just before the arrangement started (section 124-780(4)). Your adviser confirms the date |
| Subdivision 328-G: the small business restructure roll-over | No market value consideration is required, the ATO says (conditions apply); your accountant may still want a value on file | The transfer, if wanted |
| No roll-over | What is moved, if nothing is paid, or the price is not market value and the parties did not deal at arm's length (sections 116-30, 112-20) | The CGT event |
Who values a business for a holding company restructure in Australia?
An independent business valuer values the companies, shares or units against the roll-over test your adviser has chosen, at the dates your adviser confirms. The ATO's Market valuation for tax purposes guide says acceptability usually depends on the valuation process rather than who conducted it, and that a prospective assessment will not be considered reasonable or acceptable. A property valuer values any land and buildings. Oliver Group gives each entity its own value, at the date its test applies, in one signed report.
Can a restructure shift value between owners?
It can, if new shares are issued for less than market value. Division 725 of the Income Tax Assessment Act 1997 deals with direct value shifts, where something done under a scheme, such as issuing shares at a discount, lowers the market value of interests in a company or trust (section 725-145). In the Act's own example, a family company issues a $2 share to the owners' son when their two $2 shares are worth much more, causing a large CGT liability for the parents that would not arise at market value. Conditions apply, including a $150,000 threshold on the total fall in value (section 725-70), and whether the rules apply is for your adviser.
Is there stamp duty on a holding company restructure?
There can be, and each state sets its own rules: Revenue NSW says a corporate reconstruction or consolidation may bring transfer duty or landholder duty. Some states give relief, with conditions: in New South Wales, eligible corporate reconstruction and consolidation transactions on or after 1 February 2024 pay 10 per cent of the duty otherwise payable (section 273B of the Duties Act 1997 (NSW)); Queensland exempts some transactions between group companies, including interposing a new parent company, on written application. Check with your state revenue office or adviser; Oliver Group does not advise on duty.
What does the valuer need, and what does the report contain?
Once you engage, send the documents below; nothing is needed to start. The signed report gives each entity its own concluded value and supportable range at the date its test applies, with the method and evidence, the assumptions and limitations, an independence statement and the signature of the valuer responsible. A second valuer reviews every report before it is signed, and the working file is kept for ten years. Usually we need:
- ·A group chart, before and after
- ·Three years of accounts for each entity, plus year-to-date figures
- ·Constitutions, shareholders' agreements, trust deeds and registers
- ·Loans between entities and with owners, including Division 7A loans
- ·Which roll-over your adviser is using, and the dates to value at
What does a holding company restructure valuation cost, and how do I start?
The fixed fee depends on the annual turnover of the business being valued, from $1,495 + GST; to start, send the enquiry form, with no documents needed. We reply within one business day, and a fifteen-minute call confirms the package, the fixed fee and the delivery date. The fee is $1,495 + GST under $2 million, with the signed report in 2 business days; $2,495 + GST from $2 million to $3 million and $3,495 + GST from $3 million to $10 million, each in 3 business days; and over $10 million, quoted in writing before work starts. Delivery time starts once payment and all required information have been received. Add-ons, agreed in writing before work starts: +$795 + GST for each additional entity and +$495 + GST for each retrospective (past) valuation date. Everyone pays the same published fee. Tax advice is not included: Oliver Group is not a registered tax agent.
- ·ITAA 1997 s 615-5: Division 615 roll-over, ATO legal database
- ·ITAA 1997 s 615-20: market value ratios, ATO legal database
- ·ITAA 1997 s 122-20: Subdivision 122-A, ATO legal database
- ·ITAA 1997 s 152-15: maximum net asset value test, ATO legal database
- ·ITAA 1997 s 725-145: direct value shifting, ATO legal database
- ·ITAA 1997 s 124-780: scrip for scrip roll-over, ATO legal database
- ·ITAA 1997 s 104-10: CGT event A1 and its timing, ATO legal database
- ·Income Tax Assessment Act 1997, other sections cited, Federal Register of Legislation
- ·Small business restructure roll-over, ATO
- ·Market valuation for tax purposes (guide), ATO
- ·Corporate reconstructions and consolidations, Revenue NSW
- ·Corporate reconstruction exemption from transfer duty, Queensland Revenue Office
Common questions.
Can a sole shareholder use Division 615 to put a holding company on top?+
No. Division 615 needs you and at least one other entity to own all the shares or units in the company or unit trust (section 615-5). A sole owner's adviser may look at Subdivision 122-A, which covers an individual or trustee moving a CGT asset, such as shares, into a wholly owned company for shares whose market value is substantially the same as the asset's, less liabilities taken on.
Is a valuation needed for a small business restructure roll-over?+
Not always. The ATO's guidance on this roll-over says no market value consideration, or any consideration, has to be given for the assets, and the transferee takes them at the transferor's cost. Your accountant may still want a value on file, in case the roll-over is later found not to apply and the market value rules apply instead.
When should the valuation for a holding company restructure be done?+
Division 615 tests values at set moments: immediately before the first disposal, redemption or cancellation of the original shares or units, and immediately after the completion time. Before signing, a current valuation lets your adviser check the share numbers; we do not value at future dates. Afterwards, we value as at the moments the test sets; each past date is +$495 + GST.
Can a holding company restructure affect the small business CGT concessions later?+
Possibly. If the owners may later use the small business CGT concessions, the maximum net asset value test adds up, broadly, the market value of the CGT assets, less related liabilities, of the taxpayer, its connected entities and affiliates just before that later CGT event, against a $6 million limit (sections 152-15 and 152-20). That is a separate, later valuation.
How is a restructure with several companies or trusts priced?+
The base fee depends on the annual turnover of the business being valued, from $1,495 + GST, and each additional entity is +$795 + GST, agreed in writing before work starts. Each retrospective (past) valuation date is +$495 + GST.
Small Business Restructure Roll-over (Subdivision 328-G): The Valuation Evidence It Requires
The Market Value Substitution Rule, Explained
CGT Events Explained: Which Ones Trigger a Business Valuation and When
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