Valuing an NDIS business for a restructure or a tax event

Your accountant may ask for one. A transfer of the business to a new entity is typically a CGT event, and the ATO expects a supportable market value wherever a provision turns on it, for example where assets are transferred for nothing or not at arm's length, or where a concession such as the maximum net asset value test is measured in market values. Your accountant may also want a value for the new entity's accounts. The regulatory side runs in parallel, because the Commission links a registration to one ABN and the new entity must apply in its own right. HPNA provides the value at the date your accountant identifies. Whether a roll-over applies, and what the tax consequences are, should be confirmed with your accountant.

No. The NDIS Quality and Safeguards Commission states that a registration is linked to a single ABN, is not transferable to a different ABN, and once linked cannot be updated or amended. If the business needs to be linked to a different ABN, a new registration application is required, which means a verification or certification audit before the new entity can deliver supports that require registration. The Commission also notes that some structures, such as a sole trader, may not allow the ABN itself to move. Participants must not be automatically moved across. How the restructure is sequenced so that supports continue is a question for your lawyer and the Commission.

The date the provision fixes, which your accountant identifies. The ATO states that where there is a contract, a CGT event on disposal happens when the contract is entered into rather than at settlement, and for a transfer of an asset to a trust, when the asset is transferred. The ATO guide says market value for tax purposes requires a valuation for the date the legislation specifies and that a prospective assessment will not be considered acceptable. For an NDIS provider that date also fixes the pricing schedule, plan rules and registration settings the valuation uses, so two valuations of the same business months apart can properly differ.

It may be. The ATO states that the roll-over does not require that market value consideration, or any consideration, be given, but it requires a genuine restructure of an ongoing business with no change in ultimate economic ownership, applies to entities with aggregated turnover of less than $10 million, and is not available for assets such as loans to shareholders. Where membership interests are issued as consideration, the ATO says their cost base is worked out from the roll-over costs and adjustable values of the assets less the liabilities assumed, not from a market value. Your accountant may still ask for one where an asset falls outside the roll-over, or for the stamp duty or GST consequences the ATO says may need considering before restructuring. Whether the roll-over is available, and whether a valuation is needed, is for your accountant.

As one asset with several sources. Under Taxation Ruling TR 1999/16, goodwill is a single CGT asset that attaches to the whole business and is legally distinct from the sources it emanates from, and the ruling states it is more accurate to speak of goodwill having sources than being composed of elements. For a profitable business, its preferred approach values goodwill as the difference between the present value of the business's predicted earnings and the sum of the market values of its off balance sheet assets and identifiable net assets, while accepting that other methods may be adopted. HPNA explains which sources carry the earnings, including the owner personally, so the deed and the accounts record a figure whose reasoning can be followed and tested on review.

Separately, at the same date. The dwelling produces a property-backed return and is valued by a property valuer on property fundamentals; the entity that holds it is then usually assessed on net assets using that figure. The support operation is valued on its maintainable earnings after any rent paid to the related landlord is restated to market. Loans between the entities and their owners are then dealt with in the bridge from enterprise value to equity value, not folded into either figure. The ATO lists inappropriate apportionment of value across assets among the issues it commonly sees, so each part is valued on its own evidence and reconciled to the whole.

Market value may be substituted. The ATO states that if you receive nothing in exchange for a CGT asset you are taken to have received its market value at the time of the CGT event, and that you may also be taken to have received market value where what you received differed from it and you and the new owner were not dealing at arm's length. A transfer to a spouse, an adult child or a family trust may sit in that territory. Separately, where a private company transfers property to a shareholder or their associate, section 109C treats the transfer as a payment and measures it at the arm's length amount less any consideration given. An independent valuation provides evidence of that amount. Whether either rule applies is for your accountant.

Acceptance usually turns on the valuation process, not on who prepared the report. The ATO guide states that for tax purposes the acceptability of a valuation usually depends on the valuation process undertaken rather than who conducted it, that there is no formal admissions board in Australia for business valuers, and that the onus for a replicable and defensible valuation stays with the taxpayer even when a professional is engaged. HPNA prepares the report to the contents the guide sets out, holds every report it signs to the APES 225 guidelines, and retains the working papers. That gives a reviewing officer or valuer the evidence trail the guide asks for, but no valuer can promise the ATO will reach the same figure.