Business Valuations in a Family Law Property Settlement
What you need to know if you or your spouse own a business
When a marriage or de facto relationship breaks down, dividing assets is rarely straightforward — and if one or both parties own a business, the complexity increases significantly. The value of that business needs to be identified, assessed, and factored into the overall property settlement. Getting this right can mean the difference of hundreds of thousands of dollars.
This article explains how businesses are treated in family law property settlements, how they are valued, and what you should be thinking about if a business is involved in your matter.
Is a business included in a property settlement?
Yes. A business interest is a financial asset, and like all assets of the relationship, it must be identified and valued as part of the property pool. This applies regardless of the structure of the business — whether it is operated as a sole trader, a company, a partnership, or through a trust.
It also applies regardless of which party owns or runs the business. If the business was established or grown during the relationship, both parties are likely to have a claim to a share of its value — even if only one of them was actively involved in running it.
How is a business valued in family law proceedings?
Business valuation in family law is carried out by a business valuer— a specialist accountant who is experienced in assessing the value of businesses for legal proceedings. In most cases, the Court will appoint a single expert, jointly retained by both parties, to carry out the valuation. This is designed to reduce costs and avoid a "battle of the experts," although parties can engage their own experts to critique or respond to the joint expert's report.
The valuer will examine the business's financial records — typically three years of financial statements, tax returns, BAS statements, and bank accounts — and apply one or more recognised valuation methodologies.
What valuation methods are used?
There are several recognised methodologies used to value businesses in family law proceedings. The most commonly applied is:
Capitalisation of Maintainable Earnings (EBIT/EBITDA multiple)
This is the most widely used method for small to medium businesses. The valuer identifies the business's maintainable earnings — a normalised, sustainable level of profit — and applies a multiple to arrive at a value. The multiple reflects the risk profile of the business, the industry, the growth prospects, and comparable market transactions.
For example, a business with maintainable earnings of $300,000 and an applied multiple of 3 could be valued at $900,000.
Other methodologies that may be applied (usually in combination or as a cross-check) include:
Net asset value / balance sheet approach
The business is valued based on the net value of its assets less its liabilities. This is most appropriate for asset-heavy businesses (such as property or plant and equipment businesses) rather than service or goodwill-based businesses.
What is "goodwill" and does it get included?
Goodwill is the value of a business over and above its tangible assets — it reflects the business's reputation, customer relationships, intellectual property, and earning capacity. In family law, goodwill is generally included in the valuation and forms part of the asset pool.
However, a distinction is sometimes drawn between commercial goodwill (which attaches to the business itself and has a realisable value) and personal goodwill (which attaches to the individual and cannot be transferred or sold). Courts and valuers approach this distinction differently depending on the nature of the business, and it is a common area of dispute.
What if the other party is hiding income through the business?
This is a real and common concern in family law matters involving businesses. Parties who control a business have a significant ability to manipulate income — through timing of revenue recognition, inflating expenses, directing income to related parties, or simply not declaring cash transactions.
If you suspect the other party is not accurately disclosing the true income or value of the business, a forensic accountant can also investigate. Subpoenas can also be issued to banks, the ATO, and accountants to obtain underlying financial records. Courts take non-disclosure very seriously, and adverse inferences can be drawn against a party who fails to comply with their disclosure obligations.
Does the business have to be sold?
Not necessarily. In most cases, the Court aims to achieve a division that avoids the forced sale of an operating business where possible. The party who operates the business will usually retain it, and the settlement is structured so that the other party receives a greater share of other assets — such as the family home, superannuation, or cash — to compensate for the business value they are giving up.
Where there are insufficient other assets to achieve this, the options may include:
A lump sum payment from one party to the other
Deferred payments over time
What should I do if a business is involved in my settlement?
Get advice early — business valuation disputes are expensive and time-consuming. Understanding the landscape from the outset allows you to make informed decisions about whether to negotiate or litigate.
Preserve financial records — gather financial statements, tax returns, BAS statements, and bank records for the business going back at least three to five years.
Be alert to non-disclosure — if the other party controls the business, ensure your lawyer makes full disclosure requests and follows up if records are incomplete or inconsistent.
Understand the methodology — don't accept a valuation figure without understanding how it was reached. The assumptions used can be challenged, and an independent review of the joint expert's report is often worthwhile.
Think about structure — consider whether retaining or relinquishing the business serves your long-term interests, not just your short-term settlement outcome.
How Wallen Family Law can help
Business valuations are one of the most technically complex and financially significant aspects of family law property settlement. At Wallen Family Law, we work with experienced forensic accountants and counsel to ensure that business interests are properly identified, valued, and accounted for — and that our clients understand exactly what they are negotiating over.
Whether you are the business owner or the non-business-owning spouse, we can help you navigate this process and achieve a settlement that properly reflects the value of what has been built during the relationship.
Book a consultation with Principal Solicitor Melody van der Wallen today.
