The recent capital gains tax reforms may not change every founder’s decision to sell. They may, however, fundamentally change when that decision gets made, according to Julia Vargiu and Michael Chin from SI Global.
Spend enough time around independent agency and tech founders and you’ll notice something interesting.
Very few wake up on a Tuesday morning and decide to sell their business.
A sale is usually the result of a much longer conversation. One about growth, succession, risk, shareholder alignment, acquisition interest, private equity, family, fatigue, ambition or simply recognising that the market is offering something too good to ignore.
Until now, one question almost always came towards the end of that conversation.
“What’s the business worth?”
The capital gains tax reforms may quietly bring that question forward.
Not because every founder should suddenly rush to market. Nor because every business will be affected in the same way. But because, under the new framework, establishing the market value of your shares immediately before 1 July 2027 may become an important reference point for future decisions.
That’s a very different role for a valuation.
Historically, founders have commissioned valuations when a shareholder was retiring, an investor was coming in, an employee share scheme was being established, a dispute needed resolving or a sale process was beginning. Valuation supported strategy.
The reforms have the potential to reverse that sequence.
Valuation may begin shaping strategy.
That’s the conversation we’re already having with founders.
The first question isn’t tax. It’s value.
Most founders know their revenue and EBITDA. Most have a rough idea what they think the business is worth… because they are basing it on what they’ve heard another agency sold for, or because someone made an approach three years ago.
But corporate finance doesn’t value businesses on anecdotes. Markets don’t either.
If you’re selling shares, the relevant question isn’t simply revenue or EBITDA. Those are inputs. The commercial question is the market value of the equity being sold. In other words, what would an informed buyer pay for your shares today, based on today’s market, today’s risk profile and today’s opportunities?
That distinction has always mattered. It may matter considerably more over the next twelve months.
Not every founder is having the same conversation.
A business comfortably below the $10 million small business threshold is probably asking one set of questions. If it expects to remain below that threshold, the reforms may ultimately have less impact than they do for larger businesses. Its focus is likely to be on building enterprise value, improving profitability, strengthening its market position and understanding what ultimately makes the business attractive to a buyer.
A business sitting at $8 million or $9 million has a different conversation. If it expects to grow beyond $10 million over the next few years, today’s decisions start taking on a different significance. Does it establish the market value of its shares before it crosses that threshold? Does it accelerate growth? Does it bring forward a capital raise or sale process? Or does it simply continue executing its strategy, understanding that its position may look very different in two years’ time?
Then there’s the business already above $10 million. Here the conversation shifts again. The questions become less about qualifying for concessions and more about transaction timing, shareholder alignment and future equity value. If the business is likely to create substantial additional equity value over the next few years, how might that influence the timing of a transaction?
None of these questions automatically lead to the same conclusion. They simply mean founders are making decisions in a more complex environment than they were twelve months ago.
Ownership suddenly becomes part of the valuation conversation.
Independent agencies rarely have textbook ownership structures.
Two founders might each hold their shares through discretionary family trusts. There may be an employee equity pool. Perhaps an angel investor came in five years ago and owns ten per cent. One founder is ready to exit while another wants to build for another decade.
On paper, two agencies can have identical revenue, identical EBITDA and identical enterprise value. In reality, their shareholders may have very different conversations about timing. That’s before anyone has opened the tax legislation.
The biggest unanswered question.
With the legislation now passed, we know that taxpayers can either obtain an independent valuation or default to the ATO’s apportionment formula, but we still don’t know exactly what standard the ATO will ultimately expect for founders to establish the value of their shares as of 30 June 2027.
Will an independent market valuation become the accepted benchmark?
Will there be prescribed methodologies?
Will contemporary transaction evidence carry more weight?
We simply don’t know yet.
Those answers may emerge over the coming months or they may not. Ignoring the questions until they’re answered, however, is probably the least strategic response available.
The conversations we’re already having.
Interestingly, very few of the conversations we’re having with founders begin with tax.
They begin with timing.
“What is my business worth today?”
“If I wait three years, where does the value come from?”
“Should I keep growing independently or find a growth partner?”
“If strategic buyers are actively acquiring businesses with our capabilities today, what does the buyer landscape look like in eighteen months?”
“If AI is changing the economics of our sector, how will buyers value businesses like mine in two or three years?”
The tax reforms haven’t replaced those questions. They’ve simply added another dimension to them.
A founder recently said, “I thought I had another three years before I needed to think about this.” That assumption may be the biggest thing these reforms change.
Which brings us back to where we started.
For years, founders have obtained valuations because they were preparing to sell. Over the next twelve months, many may decide to obtain one because it helps determine whether, when and how they sell.
That’s a subtle change. But subtle changes are often the ones that reshape markets.
So, here are the questions we would leave on the table.
“If we asked you today what your business was worth, could you answer with confidence?”
“If we asked you, as at 30 June 2027, what the market value of your shares was immediately before the new regime commenced, could you substantiate your answer?”
It’s true that the tax tail shouldn’t wag the dog but we should not forget that it has one!
Julia Vargiu and Michael Chin are directors at SI Global.
