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ASIC’s Regulatory Guides 111 and 112 matter because they shape how Independent Expert’s Reports are prepared, tested and trusted in Australia. For business owners, the practical issue is not just compliance, it is valuation quality. These guides influence who can act as an independent valuer, what assumptions must be examined, how conflicts are managed, and whether a report will withstand scrutiny from directors, shareholders, regulators, courts and financiers. If your business valuation may be used in a transaction, restructure, related party dealing, dispute or tax setting, understanding these requirements is essential.

Understanding RG 111 and RG 112 in a valuation context

Australian business owners often encounter ASIC Regulatory Guide 111 and Regulatory Guide 112 when a transaction involves listed entities, controlled entities, related party dealings, or any situation where an Independent Expert’s Report is required or expected. While these guides are not business valuation standards in themselves, they heavily influence the professional environment in which a valuation engagement is undertaken.

RG 111 deals with content expectations for reports, including the level of analysis, disclosure and reasoning that should support an expert conclusion. RG 112 focuses on independence, including when an expert is sufficiently independent to provide a credible opinion. For valuers, that matters because a report is only as persuasive as the robustness of its methodology and the impartiality of the person preparing it.

In practical terms, these guides help determine whether a valuation can be relied upon for decision-making, not merely whether it has been prepared. That distinction is critical where business value will affect shareholder approval, fairness assessments, asset transfers, or pricing between related parties.

Why independence is central to business valuation credibility

Independence is one of the most important features of any valuation engagement. If a valuer has a financial interest in the outcome, a contingent fee arrangement, or a relationship that could reasonably be seen to compromise objectivity, the report may lose credibility even if the analysis is technically sound.

Under RG 112, independence is about both actual and perceived independence. That means the expert must be able to demonstrate that the conclusion was reached objectively, free from undue influence. For privately held businesses, this is especially important because market evidence is often limited, management forecasts are not independently verified by the market, and judgement plays a larger role in selecting assumptions.

From a valuation perspective, independence affects how buyers, sellers, lenders and regulators interpret the result. A valuation prepared without adequate independence may be challenged on the grounds of bias, which can undermine a transaction, create disputes, or force additional reporting and cost.

What RG 111 means for valuation content and reasoning

RG 111 is important because it reinforces the need for a report to explain not only the conclusion, but the basis for reaching it. In a proper business valuation, the report should show how market data, earnings normalisation, forecasts and risk adjustments were considered. It should also explain why particular approaches were adopted and others were not.

For privately held businesses, this typically means a well-supported assessment using one or more of the following approaches: discounted cash flow, capitalisation of maintainable earnings, market-based multiples, or in some cases net tangible asset value. The selected method should match the business model, stage of maturity, recurring revenue profile, asset intensity and industry risk.

A useful report will usually set out key assumptions such as forecast growth, margin expectations, capital expenditure, working capital requirements, and cost of capital. Where market multiples are used, the report should explain comparable company selection, the relevance of EBITDA or normalised seller’s discretionary earnings, and any adjustments made for size, liquidity or control.

RG 111 also supports the idea that the expert should discuss uncertainty. That is highly relevant in valuation. Forecasts are not certainties, and a comprehensive report should identify the sensitivity of value to changes in earnings, discount rates, terminal growth, churn, retention, or timing assumptions.

How this affects valuation methodology for privately held businesses

Most privately held businesses are valued using a combination of income-based and market-based reasoning. The Independent Expert’s Report framework under RG 111 and RG 112 does not replace valuation methodology, but it does require the reasoning to be transparent and defensible.

For established operating businesses, EBITDA multiples are common where earnings are reasonably stable and comparable market data is available. Smaller owner-managed businesses may be more appropriately assessed using SDE multiples, particularly where the owner’s remuneration and discretionary expenses need to be normalised. High-growth recurring revenue businesses may require revenue multiples, although the valuation must still test customer concentration, churn, net revenue retention, gross margin profile and the quality of recurring contracts.

Discounted cash flow analysis is often appropriate where the business has identifiable forecast cash flows and a clear value driver profile. In that setting, the Weighted Average Cost of Capital, working capital cycles, capital intensity and terminal growth assumptions become central. A professional valuation engagement will not simply apply a formula, it will test whether the forecast is commercially realistic and whether the risk adjustment reflects the business properly.

Where a business has material intangible value, such as software, distribution relationships, brand goodwill, or recurring contracts, the report should address how that value is captured in the methodology. If a transaction or dispute involves control premiums or discounts for lack of control and lack of marketability, those adjustments should be explained carefully rather than asserted as standard percentages.

Australian market context and regulatory overlap

In Australia, business value is frequently assessed in contexts where regulatory and tax considerations interact. A valuation prepared for an Independent Expert’s Report may later be relied on for Capital Gains Tax purposes, the small business CGT concessions, the 15-year exemption, active asset testing, Division 7A issues involving private company loans, or GST treatment where a business sale is structured as a going concern. In each case, the valuation evidence must stand up to scrutiny.

The Australian Taxation Office expects market value to be determined on objective, supportable grounds. That means a valuation should reflect the price that would be negotiated between informed, willing parties acting at arm’s length. For business owners, this matters because tax outcomes can turn on whether value is too high, too low, or not properly supported.

Division 296 is also increasingly relevant for some owners. The measure commenced on 1 July 2026 and applies as a personal tax on realised earnings attributable to a member’s Total Superannuation Balance above the indexed thresholds of $3 million and $10 million, with additional tax rates of 15% and 25% applying respectively under the final law. Unrealised gains are not taxed. First assessments are issued in the 2027-28 year for the 2026-27 financial year. For SMSFs holding business assets, business real property, or shares in a privately held company, current market valuations are important, including where a market value cost base reset is available as at 30 June 2026. That creates a direct need for professional valuation support.

Common mistakes business owners make with independent expert reporting

One of the most common errors is assuming that any accountant, broker or corporate adviser can provide a report that meets the independence and content expectations of RG 111 and RG 112. While many professionals contribute useful information, an Independent Expert’s Report requires suitable valuation expertise, independent judgement and a report structure that can survive challenge.

Another mistake is relying on headline market multiples without testing their relevance. A 4 times EBITDA multiple in one industry may be reasonable, while 8 times may be excessive or conservative depending on growth, customer concentration, recurring revenue quality, margin stability and transaction structure. Using a sector multiple without adjustments for business size, owner dependence, working capital needs or non-recurring earnings can lead to serious misstatement of value.

Some owners also overlook normalisation adjustments. If management accounts include one-off legal costs, personal expenses, under-market owner wages, related party rent anomalies or discretionary spend, the valuer should adjust maintainable earnings before applying a multiple or DCF model. Failure to do so can materially distort enterprise value.

It is also a mistake to treat independence as a formality. In practice, perception matters. If a valuation is being prepared for a related party transaction, shareholder dispute or fairness opinion, the report should clearly disclose instructions, scope, assumptions and any limitations. A transparent process reduces the risk of challenge later.

Valuation engagement choices under APES 225

APES 225 Valuation Services provides useful professional guidance for valuers in Australia. It recognises different levels of work, including a full Valuation Engagement, a Limited Scope Valuation Engagement and a Calculation Engagement. The distinction matters because the purpose of the report should match the level of assurance required.

A full Valuation Engagement is generally the most appropriate where the report may be relied on for an Independent Expert’s Report, litigation, significant transactions or tax-sensitive matters. A Limited Scope Valuation Engagement may be suitable where constraints are agreed in advance, but the user must understand the limitations. A Calculation Engagement is narrower again and is usually based on specified assumptions or procedures with reduced judgement and a lower level of assurance.

For an Independent Expert’s Report, a calculation-only approach will often be insufficient unless the circumstances are very limited and clearly disclosed. The report should be strong enough to support the conclusion expected under ASIC’s framework, especially where parties may rely on the conclusion to approve or reject a transaction.

What business owners should ask before commissioning a report

Before engaging a valuer, business owners should ask whether the report needs to satisfy regulatory, tax, transaction or dispute requirements. The answer determines the scope, the methodology, the level of independence required and the depth of analysis.

It is also sensible to ask how the valuer will treat forecast earnings, market comparables, control premiums, discounts for lack of marketability, and any non-recurring items. If the business has recent growth, subscription revenue, customer cohorts or significant one-off events, these should be examined carefully rather than averaged away.

Finally, owners should ensure the valuation engagement is documented clearly from the outset. Clear instructions, access to financial records, and full disclosure of related party dealings, normalisation items and contingent liabilities will improve the reliability of the final report.

Conclusion

ASIC Regulatory Guides 111 and 112 are not just compliance documents, they shape how independent expert reporting is expected to be prepared and understood in Australia. For business owners, the message is straightforward, independence, transparency and valuation quality all matter. A properly prepared valuation should explain the method, support the assumptions and withstand scrutiny from stakeholders who depend on it.

If you need a defensible business valuation for an Independent Expert’s Report, transaction, tax matter or shareholder issue, contact InteleK Business Valuations & Advisory for a confidential consultation with an experienced Australian valuer.