Goodwill valuations that separate what is saleable from what is not.

A goodwill valuation establishes what part of a business's value is genuinely transferable goodwill — and what part is personal to the owner, or not goodwill at all. Prismi prepares evidence-led goodwill valuations for sale contract apportionment, stamp duty, CGT and family law matters across Australia, applying the legal meaning of goodwill the courts use, with the personal-versus-transferable split documented and defensible.

When a goodwill valuation is required

Goodwill is where most of the argument in a private business valuation lives. It is the component a buyer pays for beyond the identifiable assets, the component a sale contract must apportion, the component state revenue offices assess in the jurisdictions that still levy duty on business asset transfers, and the component most often disputed in family law property settlements. A standalone goodwill valuation is required when a sale contract needs a defensible apportionment between goodwill, plant and other assets, when duty is payable on a business transfer, when pre-CGT status is claimed for the goodwill of a business that commenced before 20 September 1985, when a family law matter requires the personal component to be identified and separated, and when the ATO or a state commissioner has questioned a goodwill figure already lodged.

What goodwill means at law — and why the definition changes the number

The legal meaning of goodwill is narrower than most balance sheets suggest. Under AASB 3, accounting goodwill is a residual — whatever remains of the purchase price after the identifiable net assets are deducted, which can sweep in synergies, overpayment and valuation error. The courts take a different view. In Commissioner of State Revenue v Placer Dome (2018), the High Court confirmed that goodwill at law is the attraction of custom — the benefit of the business's reputation, connections and the sources that draw customers to it — and rejected a top-down residual approach that treated everything unexplained as goodwill. TR 1999/16 applies the same reasoning for tax purposes, treating goodwill as a single, indivisible asset that comes into existence when the business commences. The distinction is not academic: a residual figure and a legal-definition figure can differ materially, and the context determines which one is being tested. A goodwill valuation prepared without engaging the legal definition is exposed the moment it is reviewed.

Personal goodwill versus goodwill a buyer can actually acquire

Not all goodwill transfers. Where the attraction of custom depends on the skill, reputation or relationships of a specific individual — the principal of a professional practice, the specialist, the founder whose name is on the door — that component is personal goodwill, and it cannot be sold. What a buyer acquires is the transferable component: systems, brand, location, workforce, contracts and the custom that survives the owner's departure. Separating the two is a methodological exercise, not an assertion. We test revenue dependence on the principal, referral source concentration, whether the business trades under a personal or institutional name, whether clients contract with the entity or the individual, how the business performs during the owner's absence, and the terms of any restraint and transition arrangements. The report documents each factor and the weight it carries, so the split concludes at the position the evidence best defends rather than at a round number.

How the number is built: residual method versus capitalised super profits

Two approaches dominate goodwill valuation, and choosing between them is a supportability question. The residual method values the whole business enterprise, deducts the market value of the identifiable tangible and intangible assets, and treats the remainder as goodwill. It is supportable where the enterprise value and the identifiable assets can each be independently evidenced — but it inherits every error in both inputs, and Placer Dome is a standing caution against letting the residual absorb value that belongs elsewhere. Direct capitalisation of super profits builds goodwill from the ground up: earnings above a fair return on the identifiable assets employed, capitalised at a rate reflecting the durability of the custom. It is supportable where normalised earnings and asset returns can be evidenced, and it produces a figure that answers the legal definition directly. Consistent with IVS and the market value basis in IVS 104, our reports typically run both approaches, explain any divergence, and conclude at the position methodology and evidence best defend.

Where the goodwill figure gets attacked

Goodwill numbers are rarely tested in the abstract. They are tested in contexts where another party has a direct financial interest in a different number.

• ·Sale contract apportionment — buyer and seller want different splits between goodwill, plant and stock, and the apportionment flows through to CGT, depreciation and duty outcomes on both sides
• ·Stamp duty — in the states and territories that still levy duty on business asset transfers, the commissioner has an interest in how much of the price is dutiable, and the legal definition of goodwill decides it
• ·Pre-CGT goodwill — where a business commenced before 20 September 1985, TR 1999/16 treats the goodwill as pre-CGT only while the business remains the same business; the valuation and the business-identity analysis are both examined
• ·Family law — the personal-versus-transferable split can materially change the property pool, and single-expert valuations are tested by both parties' advisers
• ·ATO review — goodwill apportionments in related-party sales and small business CGT concession claims are examined against the ATO's market valuation guidance

If the ATO, a state revenue office or the other side disputes the figure

A disputed goodwill figure usually fails on support, not arithmetic — a residual adopted without testing, a personal component never addressed, or an apportionment asserted in the contract with no valuation behind it. Where a figure is challenged, we prepare a fresh independent valuation at the relevant date, or review the existing one and say plainly what stands and what does not. The report documents the legal definition applied, the methods tested, the evidence for the personal-versus-transferable split and the reasoning for the concluded position, so your accountant or lawyer has something substantive to attach to an objection or response. No one can guarantee how a commissioner or a court will decide; our role is to make your position the most supportable one the evidence allows. We prepare the valuation only — we are not a registered tax agent, and your adviser manages the objection, the duty assessment and the legal application.

Which report tier fits

Straightforward apportionment support for an arm's length sale generally sits at the Comprehensive tier (from $3,995 + GST, 15–25 business days). Matters where the figure is likely to be examined — duty assessments, pre-CGT goodwill claims, related-party sales and family law — warrant the Defensible Valuation File (from $8,995 + GST, 25–35 business days). Where the dispute turns on where the split lands rather than on a single number, the Valuation Range & Scenario Review premium engagement produces a structured analysis of the supportable range. Pre-CGT matters requiring a historical valuation date add the $495 retrospective surcharge per date, additional entities are $750 each, and fees are fixed at engagement — never contingent on the outcome.