Goodwill
Last reviewed 13 June 2026 by Nick Lim, finance broker (FBAA).
Goodwill is the value of a business beyond its physical assets, reflecting its reputation, patient or customer base, brand and ongoing earnings. In a practice sale goodwill is often the largest part of the price and is treated as a CGT asset, where small business CGT concessions may reduce the tax. Lenders will fund goodwill in a practice buy-in or practice acquisition but assess it carefully because it cannot be repossessed like equipment.
Why Goodwill Matters
Goodwill is usually the biggest and most contested number in a business sale, and the hardest for a lender to secure.
- Value above the physical assets
- Often the largest part of a practice price
- A CGT asset, with concessions sometimes available
- Funded in a practice acquisition but assessed carefully
- Cannot be repossessed, so lenders want other security
Common Features of Goodwill
- Reputation, patient base and earnings
- Recorded on a balance sheet only when bought
- Valued on a multiple of earnings
- Subject to CGT on sale
- Backed by additional security when financed
Official reference: ato.gov.au
What is goodwill?
The value of a business beyond its physical assets, including reputation, customer base and earnings.
How is goodwill valued?
Often as a multiple of maintainable earnings, varying by industry and the strength of the business.
Is goodwill taxed?
Yes, it is a CGT asset on sale, though small business CGT concessions may reduce the tax.
Can you borrow against goodwill?
Yes, in a practice buy-in or acquisition, but lenders want extra security since goodwill cannot be repossessed.
Why is goodwill risky for lenders?
Because its value depends on the business continuing to perform and cannot be sold off like equipment.