Increase Your Business Valuation Before 1 July 2027

We regularly speak with financial advice practice owners about exit planning and the tax implications of a future sale. In the past, many have relied on either an earnout over three to five years or selling in a lower income year, often the first year of retirement, to help reduce the capital gains tax impact.

With proposed CGT changes from 1 July 2027, practice owners need to focus not only on growing value, but also on when that value is realised, the timing of valuation is now critical.

• The 50% CGT discount may be removed
• Indexation and a 30% minimum tax may apply instead

For most financial advice businesses, the cost base is low, often close to zero, which means a large portion of the sale price may become taxable.

That makes the key question not just how to grow your business, but how to increase its valuation before 1 July 2027.

The more value you build before 1 July 2027, the better your potential after-tax outcome when the business is sold.

To understand how to do that, it helps to start with how valuations are assessed in the post-GFC market.

How are advice firms typically valued?

In Australia we typically see advice firms being valued using one of two approaches:

Revenue multiple

• Usually applied to businesses with one or two advisers and a strong recurring revenue base
• Typical range is 2 times to 4 times recurring revenue

EBITDA multiple

• Usually applied to businesses with three or more advisers
• Places greater weight on profitability
• Typical range is 4 times to 8 times EBITDA

Advisers should be focused on moving their business towards the upper end of these valuation ranges before 1 July 2027, rather than waiting until the lead-up to a sale after that date.

What are the practical implications for a financial advice business owner?

Plan to obtain an independent valuation of the business as at 1 July 2027. Otherwise, a future backdated estimate for tax purposes may invite scrutiny from the ATO.

Advisers should focus on practical ways to improve valuation multiples in the lead-up to 1 July 2027.

Quantitative methods may include:

• Increase revenue. If the business has been slow to implement market-appropriate client fees, FY27 is the time to address it. To support stronger valuation outcomes, fees should be set at market rates, supported by ongoing service agreements, and applied consistently across client segments.
• Manage expenses carefully. If there is a time to run lean, this is the year. Review expense lines and identify what can be reduced or deferred. Consider whether one-off supplier discounts can be negotiated in FY27. Business owner salaries should also be normalised to a market rate for a senior financial planner, such as around $160,000. Reduced hours may also be appropriate for some employees.

Qualitative factors that can improve valuation multiples include:

• AFSL compliance record: Consider whether your AFSL has a strong compliance history and whether there is evidence from peer sales under the same AFSL that may affect buyer appetite or valuation.
• Advice & Investment philosophy: A clear and consistent philosophy with respect to investment advice and overall investment philosophy across the business can support a stronger multiple.
• Managed accounts: Recent market evidence suggests that non-aligned managed accounts can be a meaningful driver of higher valuations because they can improve compliance outcomes and support growth without a matching increase in headcount. They may also improve portability if the business changes AFSL.
• Platform concentration: Aim to have up to 80% of clients invested through one or two core platforms to reduce administration and operational complexity.

Summary

While the proposed changes have not yet been passed into law, now is still the time to act.  There is little downside in pursuing a valuation uplift now and significant potential tax savings that could eventuate later.

Quick wins can come from:

• Revenue growth that outpaces client headcount growth.
• Disciplined expense management.
• Where it is in the client’s best interests, use a non-aligned SMA on a preferred platform.

Take these steps in FY2027 and, if the CGT changes are enacted as proposed, the eventual tax saving on a business sale could be significant.