Content reviewed and verified by Graham Chee, with FCPA-led practice at Local Knowledge, Mascot NSW. Continuous CPA Australia member since 1986. Prior career at Goldman Sachs, BNP Investment Management and Merrill Lynch..
TL;DR
Whether you are handing to family, selling to a third party, or transitioning to management, the value you keep depends on decisions made long before the exit. Here is the checklist we work through.
Most succession value is won or lost years before the exit
The uncomfortable truth about succession is that the owners who realise the most from their businesses started planning three to five years out, and the ones who scramble in the final months almost always leave money on the table — often in tax, sometimes in price, and frequently in both. A business that has been groomed for transition sells for more, transfers more cleanly, and generates a far better after-tax outcome for the owner.
Succession is not a single event. It is valuation, structure, tax, documentation and people, all lined up over time. The checklist below is the sequence we work through with Sydney owners, and the earlier we start it, the more of it we can influence.
The succession checklist
Know what it is worth
Get a defensible valuation early — not to sell today, but to know your starting point and what drives the number.
Fix the structure
The entity that owns the business affects who can access CGT concessions and how cleanly ownership can transfer. Restructure early if needed.
Model the tax
Test the CGT small business concessions — 15-year exemption, 50% active asset reduction, retirement exemption and rollover — against your actual circumstances.
Reduce owner dependence
A business that cannot run without you is worth less. Document systems and build a management layer.
Choose the path
Family transfer, trade sale, or management buy-out — each has different tax, funding and relationship implications.
Document and prepare for due diligence
Clean financials, contracts, and records so a buyer or successor finds no surprises.
Plan the handover
A staged transition of relationships and knowledge protects the value being transferred.
The tax outcome can dwarf every other decision
For many owners, the business is their largest asset and its sale is the most significant tax event of their lives. The CGT small business concessions can, in the right circumstances, reduce the tax on a sale dramatically — in some cases to nil — but eligibility turns on tests that are decided long before the sale: the $6 million maximum net asset value test or the $2 million small business turnover test, whether the asset is an “active asset”, and the 15-year ownership and retirement conditions.
Getting those tests satisfied is not something you can arrange in the week before settlement. It is why we start succession conversations years ahead — so that when the opportunity to exit arrives, the structure already qualifies for the concessions rather than disqualifying you from them.
Worked example
A Sydney owner in their late fifties planned to sell within five years. Early planning revealed the business was held in a way that would have limited access to the CGT concessions, and that they were personally indispensable to the operation. Over three years we restructured ownership so the concessions would be available, and built a two-person management team so the business no longer depended on the owner day to day. At sale, the combination of a higher price (owner-independent, well documented) and access to the retirement and active-asset concessions produced an after-tax result well beyond what a last-minute sale would have delivered.
"You cannot retrofit a succession plan at settlement — the value is decided in the years before."
Frequently asked questions
Q.When should I start succession planning?
Three to five years before you intend to exit is ideal. It gives time to satisfy the concession tests, reduce owner dependence, and present clean financials.
Q.What are the CGT small business concessions?
Four concessions that can reduce or eliminate capital gains tax on the sale of an active business asset: the 15-year exemption, the 50% active asset reduction, the retirement exemption (a lifetime limit), and the rollover. Eligibility depends on turnover or net asset tests and other conditions.
Q.Is handing to family simpler than selling?
Not necessarily. Family transfers raise valuation fairness, funding, and often difficult conversations, alongside the same tax questions. They benefit from at least as much planning as a trade sale.
Q.How is my business valued?
Commonly as a multiple of sustainable earnings, adjusted for owner dependence, customer concentration, and the quality of the financials — which is why grooming the business lifts the number.
Q.What makes a business worth more at sale?
Recurring revenue, a spread of customers, systems that run without the owner, clean and reliable financials, and a credible growth story. Each of these is something you can build over the planning period.
References
References
- ATO — CGT concessions for small business — Australian Taxation Office
- ATO — Small business 15-year exemption — Australian Taxation Office
- ATO — Small business retirement exemption — Australian Taxation Office
About the Author
Graham Chee, FCPA, CPA, GRCP, GRCA
Principal and Founder, Local Knowledge
Graham Chee is the principal and founder of Local Knowledge, an FCPA-led Australian practice that brings institutional-grade compliance, investment-structure and intellectual-property experience directly to owner-managed businesses. Graham is a Fellow of CPA Australia (FCPA since November 2005, continuous CPA member since 1986) and holds the OCEG Governance, Risk & Compliance Professional (GRCP) and Governance, Risk & Compliance Auditor (GRCA) designations. His prior career includes senior roles at Goldman Sachs, BNP Investment Management and Merrill Lynch. Graham was previously portfolio manager of the Asian Masters Fund (IPO December 2007 – 31 December 2009), which returned +29% in AUD terms versus the MSCI Asia Pacific (ex Japan) benchmark. He signs off on 100% of client files personally.
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This article provides general information only and does not constitute financial, legal, or tax advice. Speak with our principal for advice specific to your circumstances. Every file is signed off by our principal under the CPA Code of Ethics.
Graham Chee FCPA, CPA, GRCP, GRCA · Principal, Local Knowledge · Mascot NSW · CPA-signed files