Valuing a Healthcare Business for Family Law

Why a healthcare practice has to be valued in a property settlement

When a marriage or de facto relationship ends, the court may alter the parties' interests in property where it is satisfied that doing so is just and equitable. Section 79 of the Family Law Act 1975 applies to married couples and section 90SM to de facto couples. Following amendments that commenced on 10 June 2025, section 79(3) directs the court first to identify the existing legal and equitable rights and interests in the parties' property and their existing liabilities, then to take into account the contributions considerations in section 79(4) and the current and future circumstances considerations in section 79(5). The Federal Circuit and Family Court of Australia has said the property changes apply to new and existing proceedings, except where a final hearing has commenced.

A medical practice, pharmacy, NDIS provider or allied health practice is property in that sense, or the shares, units or partnership interest that hold it are. It has to be identified, described and given a value before anything can be divided.

The court's Central Practice Direction pulls that work forward in the timetable. The applicant must serve a joint draft balance sheet not later than 28 days before the trial date, listing assets, liabilities, superannuation interests, financial resources and property with the values each party alleges. It is amended to the determined or agreed values on completion of any single expert valuation, and a final settled version is filed not later than 7 days before trial.

Who values the business, and why it is usually one valuer

Rule 7.02 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 sets out the purpose of Part 7.1: expert evidence only on a significant issue in dispute, restricted to what is necessary, given by a single expert where that is practicable without compromising the interests of justice, and without the cost of appointing more than one. Parties who agree that expert evidence may help resolve a substantial issue may jointly appoint one (rule 7.03), or the court may order that the evidence be given by a single expert (rule 7.04). The court can also direct how that expert is chosen and settle the instructions itself (rule 7.05).

Two features of that appointment shape what follows. Neither party may communicate unilaterally with the valuer, any communication must go to every other party at the same time (rule 7.03), and the report goes to each of them together (rule 7.07). The duty is also not owed to whoever pays: rule 7.18 provides that an expert witness's duty to the court prevails over the obligation to the person instructing or paying, and requires an objective and unbiased opinion that is independent and impartial, formed after considering all material facts, including those that detract from it.

What the letter of instruction has to settle

All instructions to an expert must be in writing. Rule 7.13 requires them to request a written report, advise that it may be used in a proceeding, state the issues on which the opinion is sought, describe any matter to be investigated, and make full and frank disclosure of the information and documents that will help the valuer. Where a single expert is appointed, the parties must provide an agreed statement of facts, or, if they cannot agree, a statement each.

Four things belong in the instruction for a healthcare practice and are often left out.

• The valuation date, the date at which value is assessed. Value is not a constant, and a practice can look materially different at each end of a long proceeding.
• The basis of value, the assumed transaction the value is measured against. Market value is the usual basis: the price a willing but not anxious buyer would pay a willing but not anxious seller, both properly informed and dealing at arm's length. Because the practitioner spouse usually keeps the practice rather than selling it, instructions sometimes also ask what it is worth to that owner, a figure that can include benefits a buyer would not pay for. Where both are sought, each should be reported separately.
• The interest being valued: the whole business, the shares in the practice company, the units in a service trust, or a partnership interest.
• Whether the valuer is to distinguish the goodwill that would transfer to a buyer from the goodwill that would not.

Getting information when only one spouse runs the practice

The party who does not work in the practice usually holds none of its records. Sections 71B and 90RI close that gap, imposing a duty on each party to a financial or property proceeding to give full and frank disclosure, in a timely manner, of all information and documents relevant to the matters in issue. Those duties moved from the court rules into the Act itself on 10 June 2025, and they are not confined to filed proceedings: separated parties preparing for a property proceeding owe each other the same duty.

Rule 6.06 reaches through the structure, covering income paid or assigned to another person or entity, property and income held by an entity a party owns or controls, trusts the party controls or benefits from, certain disposals of property, and liabilities. Before the first court date a party must serve their three most recent tax returns and assessments, the last four business activity statements if they have an ABN, and, for any partnership, trust or private company they have an interest in, that entity's three most recent financial statements and last four activity statements. Rule 6.17 sets the consequences of not disclosing a document, from being unable to use it at a hearing through to costs orders and a stay or dismissal.

A healthcare valuation needs more than that list: billings by practitioner, funding source and site; practitioner and staff agreements with hours and pay rates; the agreement between the practice entity and any service entity; related party rent and lease terms; and the registrations the business depends on. Where material is requested and not produced, the report records the request, the gap and its effect on the opinion. See what information is needed for a business valuation.

How the value itself is reached

Once the date, basis and interest are settled, the valuation applies the same accepted approaches used outside family law, and rule 7.22 requires the report to explain which was used and why. Most practices trading as a going concern are valued by capitalisation of future maintainable earnings. Maintainable earnings is the level of profit the business could reasonably be expected to sustain, taken from normalised historical results rather than from any single year, and usually measured as EBITDA (earnings before interest, tax, depreciation and amortisation) or EBIT (earnings before interest and tax). Normalisation means adjusting the reported accounts to what an arm's length owner would experience: removing one-off items, restating related party rent and interest to commercial rates, stripping out private costs run through the practice, and, above all, charging a commercial rate of remuneration for the clinical and management work the owner performs. Without that last adjustment a practitioner spouse who takes no wage appears to be earning profit that is really their own labour.

That figure is then capitalised at a multiple expressing the risk that the earnings will not continue and the growth expected of them, and the result is an enterprise value, the value of the operating business before borrowings. The multiple is a judgement about the particular practice, not a sector constant: practitioner dependence, the lease, contractor and payroll tax exposure, funding and referrer concentration and the depth of the clinical roster all move it. See healthcare business valuation methods and EBITDA multiples for healthcare businesses.

A discounted cash flow, which values forecast cash flows by discounting them back to the valuation date at a rate reflecting their risk, suits a practice whose earnings are not yet stable: a clinic still filling a new fitout, an NDIS provider building participant numbers, or a practice that has just lost a principal. It depends on forecasts both parties can test, so in a contested matter it is often supporting evidence rather than the primary method.

Net assets, the identifiable assets at market or realisable values less liabilities, is the usual method where the business does not earn enough to support goodwill or where the goodwill would not transfer: market value is then little more than equipment, fitout and stock, less debt. Market evidence, meaning prices paid for comparable practices, is a cross-check where it exists, more often in pharmacy than in small allied health. A price paid in one transaction reflects that buyer's circumstances and any special value they saw, so it is evidence of value rather than a definition of it.

Working capital, the debtors, stock and prepayments needed to trade less the trade creditors, is normally assumed to transfer at a normal level, and any departure from that level is adjusted for: a practice that bulk bills turns its receivables over quickly, a pharmacy carries substantial stock.

Personal goodwill and what a buyer could actually acquire

Goodwill is the amount by which the value of the business exceeds its identifiable net assets: the expectation that patients, participants and referrers will keep coming. Transferable, or commercial, goodwill attaches to what a buyer acquires, the location, premises, systems, records, employed team and contracts. Personal goodwill attaches to a practitioner and leaves when they do. The distinction is sharper in healthcare than in most sectors, because much of what the business runs on is issued to people or to premises rather than to the business.

• A Medicare provider number is issued to an individual health professional who is first registered with Ahpra or an approved body. One practitioner cannot use another's number, and a practitioner needs more than one where they deliver services at different locations.
• Registration as a health practitioner is held by the individual, who must confirm each year that they meet the registration standards, so a spouse who is not registered cannot step into the clinical role.
• A pharmacist is approved under section 90 of the National Health Act 1953 to supply PBS medicines, and both establishing a new pharmacy and changing the ownership of an existing approved pharmacy require an application to the Department of Health, Disability and Ageing. The approval number must be used solely for the approved premises and is not shared with other pharmacists, so this value attaches to the approved site rather than to the departing owner.
• An NDIS registration is linked to a single ABN and is not transferable to a different ABN, so a buyer who cannot take the ABN applies for a new registration. A change of ownership must be notified to the NDIS Quality and Safeguards Commission as soon as possible, and for changes from 1 July 2026 a buyer of a provider whose registration groups require a certification audit must start a condition audit within three months where the change significantly affects the organisation or its governance.

The consequence is uncomfortable but common: a practice can produce a substantial income for the practitioner spouse and still carry a market value close to its net tangible assets, because a buyer will not pay for earnings that leave with the owner. A valuation should quantify that rather than assert it. See does a medical practice have transferable goodwill and how practitioner dependence affects business value.

Partnership interests, service entities and the interest being valued

Healthcare practices are rarely held in a single entity. A common structure has a practice company or trust holding the goodwill, a service entity owning the fitout and equipment and employing the administrative staff, a related landlord, and practitioner entities that bill through the practice. Group practices add partnership or shareholder agreements, often with a price mechanism of their own.

The valuer identifies which entity holds which earnings and assets, values the operating business before debt to reach enterprise value, deducts borrowings and adds surplus assets to reach equity value, then values the specific interest the party holds. That last step matters because a share of the whole is not always a proportionate share of the value. Where the interest is a minority holding that cannot control distributions, remuneration or a sale, the report considers a minority discount, a reduction reflecting that lack of control. Where it carries control, the report considers a control premium, the extra amount attributable to being able to direct those things. A price formula in a shareholders or partnership agreement is evidence to be weighed rather than a substitute for the valuation, and the instructions should say how it is to be treated. See share and equity valuations and valuing a healthcare business for a shareholder exit.

What tends to be contested

• Owner remuneration and normalisation. The market cost of replacing the practitioner's clinical hours, a spouse on the payroll, related party rent and private costs are each tested by the other side. See what is maintainable earnings.
• Movement between dates. Billings that fell after separation, a departing practitioner or reduced sessions invite an argument about which period represents sustainable earnings.
• The personal goodwill boundary. Both parties usually accept the concept and disagree about where the line sits.
• Contractor arrangements. Whether practitioners engaged as contractors would be characterised differently for payroll tax, and what that would do to maintainable earnings and risk, is frequently in issue. See payroll tax and medical practice value.
• Notional tax and selling costs on a sale that is not happening. Whether an allowance is made is a matter for the court, not the valuer, although the valuer may be instructed to quantify it so the argument is about the figure rather than the arithmetic.
• Missing information, and whether the assumptions adopted in its place are reasonable. An assumption that was reasonable when the report was written can be displaced by a document produced later.

What a compliant single expert report contains

The Rules prescribe both form and contents. Rule 7.21 requires the report to be addressed to the court and to the instructing parties, to attach a summary of the instructions and a list of the documents relied on, and to be verified by an affidavit in the terms the rule sets out. Rule 7.22 requires the reasons for the conclusions, the methodology, the expert's qualifications, the material used, the relevant facts and assumptions, any range of opinion and the basis for preferring one view, and a summary of the conclusions. Where a question falls outside the expert's expertise, or the report may be incomplete or inaccurate without qualification, the report must say so.

For a healthcare practice that is what makes the assumptions visible: which practitioners were assumed to stay, what replacement cost was allowed for the owner's clinical work, and what was assumed about the lease and the registrations the business relies on. A market appraisal obtained for a procedural hearing or conference sits outside these instruction and disclosure rules (rule 7.12), one reason an appraisal and a valuation are not interchangeable. See business valuation versus business appraisal.

How the process runs after the report is delivered

The Rules provide a controlled way to test the opinion. The parties may agree in writing to confer with the valuer to clarify the report, and must not interrogate the expert in doing so (rule 7.25). Written questions may be put once only, within 21 days of receiving the report or 7 days after any conference, and only to clarify it (rule 7.26). The valuer answers in writing, the party asking pays those fees, and the answers form part of the report (rules 7.27 and 7.28). A different opinion needs the court's permission under rule 7.08, and where two experts do give evidence on the same question, rule 7.31 requires them to confer at least 28 days before trial and produce a joint statement of what is agreed, what is not and why.

HPNA prepares valuations of healthcare businesses for family law matters on joint instructions, and can review a single expert report where a lawyer wants the assumptions and adjustments examined before clarification questions are drafted. The engagement steps are set out at how it works. This article is general information, not legal advice: how the Act applies to a particular settlement is a matter for the parties' lawyers. To discuss an interest that has to be valued, request a valuation or read more about family law business valuations.