For many doctors, their medical practice can be one of their largest assets, yet from a valuation perspective, it is often the least understood. While most practice owners have a basic understanding of their annual profit and cash flow, far fewer know the current market value of their business.
With significant capital gains tax (CGT) changes announced in the 2026 Federal Budget and an increasingly active market for medical practices, understanding the value of your practice has never been more important.
What the CGT changes mean for practice owners
From 1 July 2027, Australia’s CGT regime will change significantly. The existing 50% CGT discount will be replaced with an inflation-based discount, together with a minimum 30% tax rate on real capital gains.
Importantly for medical practice owners, the changes are prospective.
The Treasury has confirmed that business value accumulated before 1 July 2027 will retain the existing 50% CGT discount treatment, even where the business is ultimately sold after that date. Value accruing from 1 July 2027 will fall within the new arrangements. These changes apply to privately owned medical practices and the shares or units you may hold in entities that own these assets.
In practical terms, the value of your practice at 1 July 2027 becomes a dividing line. Establishing a robust and supportable valuation around the commencement of the new regime may become particularly important in determining how much of a future capital gain relates to value created before and after that date.
The Government has also confirmed that the four existing small business CGT concessions will remain, subject to the relevant eligibility requirements.
But taxation should not be the only reason
A quality valuation provides valuable insights that can assist practice owners in making better business and financial decisions.
A medical practice valuation is more than simply applying a multiple to profit. It considers the practice’s future maintainable earnings, alongside factors such as location, doctor stability, staffing, lease arrangements, quality of financial reporting, administration systems, and overall business risk. The result is an assessment of what a willing purchaser would typically pay for the practice in the current market.
Understanding this value can be particularly useful when considering succession planning. Many practice owners are now approaching retirement and are looking at options such as introducing younger doctors into ownership, admitting a new partner, undertaking a partial sale, restructuring ownership arrangements, or preparing the practice for an eventual exit. Knowing the value of the practice helps establish realistic expectations and provides a starting point for productive discussions with potential successors or buyers.
A valuation is also a useful tool for future financial planning. It can identify what we refer to as the ‘value gap’ between the current value of the practice and the owner’s desired outcome, along with the factors that are enhancing or reducing that value. In many cases, improvements to profitability, doctor retention, governance, systems, lease security and operational processes can significantly enhance value over time.
This gives owners a benchmark against which future improvements can be measured and a practical roadmap for increasing the attractiveness of their practice.
From a personal financial planning perspective, understanding the value of the practice allows owners to better assess their overall wealth position, retirement readiness, and investment strategy. Decisions around debt reduction, superannuation contributions, property investment, and business restructuring are often more effective when made with a clear understanding of the value of the underlying business asset.
Planning ahead
Regardless of whether a sale is imminent, the upcoming tax environment provides a timely reminder that every practice owner should know what their business is worth. A valuation is no longer simply a transaction tool. It is an important component of strategic succession planning and long-term wealth management for medical practice owners.
With 1 July 2027 approaching, the message is simple: don’t wait until you are ready to sell to find out what your practice is worth
If you would like to understand what your practice is worth and what that means for your plans, please get in touch with your William Buck advisor.
