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Division 296 will matter to many Australian business owners because it changes the valuation and reporting landscape for self-managed superannuation funds that hold business premises, business real property, or interests in privately held companies. Where an SMSF owns the premises from which a business operates, the market value of that asset becomes critical for superannuation tax calculations, balance sheet accuracy, and broader business valuation work. For owners who use their SMSF as part of their long-term wealth and succession strategy, a current, defensible valuation is no longer just good practice, it is directly connected to compliance and planning.

Why business premises held in super are a valuation issue

A common Australian structure is for a business owner to have their SMSF own the commercial premises from which the operating business trades. In many cases, the trading entity pays market rent to the super fund, while the fund holds a valuable real estate asset that may sit outside the operating business balance sheet. This arrangement can be effective for asset protection and retirement planning, but it creates valuation complexity because the premises, the lease terms, and the trading business are economically linked.

When Division 296 applies, the valuation of assets inside super becomes more than a periodic administration task. The law taxes realised earnings only, and the tax is personal to the member rather than the fund. The $3 million and $10 million thresholds are indexed, first assessments are issued in the 2027-28 year for the 2026-27 financial year, and the market value of assets in the SMSF is central to the calculation. For business owners, that means the premises held in super, and in some cases shares in a private company held by the fund, may require a current market valuation to support the tax position and related reporting.

How the typical SMSF business premises structure works

In practice, an SMSF may hold business real property, often a warehouse, office, factory, or retail site, which is leased to the owner’s operating entity on commercial terms. The lease should be documented, rent should be supportable by the market, and the arrangement must satisfy superannuation rules. From a valuation perspective, the asset held by the fund is usually assessed separately from the trading business that occupies it, but the two cannot be analysed in isolation when the premises support enterprise value.

The operating business may also be partly owned by the SMSF, or the fund may hold units or shares in a private group structure. In those cases, the valuer must consider the value of the underlying business assets, the control rights attached to the investment, and any restrictions on transfer or redemption. Private company interests held in super can be harder to value than listed securities because the valuation engagement often needs to consider minority discounts, lack of marketability, and the economic effect of shareholder agreements or buy-sell arrangements.

What Division 296 changes for business owners

Division 296 does not change the fundamental valuation principles, but it increases the need for current, supportable evidence of market value. The reason is simple. If the market value of an SMSF asset rises, the member’s total superannuation balance may move closer to, or above, the relevant threshold. If the fund holds business premises or a private business interest, that value can be material and may dominate the member’s balance.

The optional cost base reset to market value as at 30 June 2026 also creates a specific valuation event. That date is a practical trigger for business owners to obtain a professional valuation of the premises or private equity interest held in super. A valuation prepared under APES 225 Valuation Services provides a recognised framework for determining market value, documenting assumptions, and supporting the figures used in the SMSF records and any related tax work.

Importantly, a valuation for Division 296 purposes is not the same as a casual estimate or a summary prepared for convenience. It should be fit for purpose, based on evidence, and aligned with a suitable valuation engagement. In some cases, a full Valuation Engagement is appropriate. In others, a Limited Scope Valuation Engagement or Calculation Engagement may be suitable, provided the extent of work, assumptions, and limitations are clearly set out and consistent with the intended use.

Valuation methodology for premises and private business interests

For business premises held in super, the starting point is generally market value. In many cases, a direct property approach is used, drawing on comparable sales, capitalisation rates, lease terms, building condition, zoning, and locational attributes. Where the premises are specialised or the lease profile is unusual, a valuer may need to assess replacement cost, income capitalisation, or an income approach adjusted for tenant quality and rental sustainability.

If the SMSF holds shares or units in a private operating business, the valuation methodology will depend on the business model. For stable, recurring revenue businesses, market multiples of EBITDA, EBIT, or SDE may be appropriate, with adjustments for normalised owner remuneration, one-off expenses, and working capital requirements. For subscription or software businesses, revenue or ARR multiples may be relevant, but only where retention, churn, and growth quality support such a framework. Strong net revenue retention, low churn, and durable gross margins usually justify higher multiples, while customer concentration or declining recurring revenue will reduce value.

Discounted cash flow analysis may also be appropriate, particularly where the business is at an inflection point, the premises are integral to operations, or the cash flows have a defined forecast period. The discount rate, often estimated using WACC or a build-up approach, must reflect the risk profile of the operating business, not merely the property. Where the SMSF holds a minority interest in a private company, discounts for lack of control and lack of marketability may also apply, depending on the rights attached to the interest and the market evidence available.

Why market value matters beyond tax

From a business valuation perspective, the premises held in super can materially affect enterprise value, succession planning, and deal structuring. Buyers and investors often want to understand whether the business trades from owner-owned premises, leased premises, or related-party premises, because each structure influences cash flow, capital commitments, and transaction risk. A business that depends on a related-party lease must be assessed carefully, as rent terms can affect maintainable earnings and therefore valuation multiples.

For example, if rent is below market, a valuer may need to normalise earnings upward to reflect a hypothetical market lease. If rent is above market, this can depress maintainable EBITDA or SDE and reduce the valuation of the operating business, even though it may increase value within the SMSF property asset. That interplay matters when owners intend to sell the business, refinance, admit a partner, or pass the business to family members.

The same logic applies to CGT planning. The small business CGT concessions, including the 15-year exemption and the active asset rules, often require an enterprise-wide understanding of asset values and ownership structures. If the premises are held in super and the business is sold separately, the analysis must distinguish between the value of the operating entity and the value locked in the property structure. GST treatment on business sales as a going concern may also be relevant to the transaction structure, although the tax outcome depends on the facts and should be considered with specialist advice.

Common valuation mistakes business owners make

One common mistake is assuming the premises can be valued using a rough estimate based on historical purchase price or the latest council rating notice. That approach is rarely sufficient for a valuation engagement under APES 225, especially where the asset is material to a member’s super balance. Market value needs to reflect current evidence, not just historic cost.

Another mistake is valuing the operating business without properly considering the related-party lease. The rent paid to the SMSF can affect earnings, and earnings drive valuation outcomes. If the lease is not at arm’s length, the maintainable profit of the business may be overstated or understated, which in turn can distort an EBITDA multiple or DCF result.

Business owners also sometimes overlook Division 7A on private company loans when superannuation and company structures interact. While Division 7A is not a valuation rule, it can affect related-party balances, cash flow, and the quality of reported profits, all of which are relevant inputs to a valuation. A valuer will often need to normalise these items to arrive at a sustainable earnings base.

Finally, some owners rely on a single figure without documentation. That is risky. A robust valuation file should explain the method, assumptions, evidence sources, valuation date, and any sensitivity around rent, yield, growth rates, or discount rates. This matters for audit support, tax review, and any later transaction or dispute.

What a professional valuer will look at

In a valuation engagement involving SMSF-held premises, a professional valuer will usually examine the lease, rent roll or rent review history, zoning, building condition, tenant strength, remaining lease term, and comparable market evidence. If the premises form part of a broader business structure, the valuer will also assess how the occupancy arrangement affects maintainable earnings and enterprise value.

Where a private company interest is held in super, the valuer will typically analyse historical and forecast financial performance, normalised EBITDA or SDE, capital expenditure needs, working capital, debt, and any dependency on the owner. If the business has recurring revenue, measures such as ARR, churn, and NRR may meaningfully influence the valuation. If the business is asset-heavy or project-based, precedent transactions and sector-specific trading multiples may be more reliable than a simple rule of thumb.

These are the kinds of issues that distinguish a proper valuation from a superficial estimate. They are also why Division 296 can trigger a real need for professional support, particularly where the valuation must be defensible to auditors, accountants, and the ATO.

Conclusion

For Australian business owners who hold their premises in super, Division 296 has made market value a practical and immediate issue. The valuation of the property, and in some cases the value of related private business interests, may influence superannuation reporting, tax calculations, and wider succession planning. Because the arrangements are often interconnected, the valuer must look beyond the balance sheet and understand how the premises, lease, and operating business interact.

If you hold business real property in an SMSF, or your super fund has an interest in a privately held business, now is the right time to obtain a current, supportable valuation. InteleK Business Valuations & Advisory provides professional valuation engagements for privately held businesses and related structures across Australia. If you would like a confidential discussion about your circumstances, please contact InteleK Business Valuations & Advisory to schedule a valuation consultation.