EBITDA Normalization Checklist for Buying a Business in Australia (Free Download)

The Complete EBITDA Normalization Checklist for Australian Business Buyers

Use this checklist when reviewing financial statements for any small or medium business acquisition in Australia. Work through it with three years of P&L statements, BAS reports, and tax returns in front of you. One year is not enough — you need to see the pattern.

Format: Work through each section in order. Mark each item as: ✓ Reviewed / N/A Not applicable / ⚠ Requires further information

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Phase 1: Verify the Starting Numbers

Before you adjust anything, confirm you're adjusting the right base.

• Obtain profit and loss statements for the last 3 financial years (FY24, FY25, FY26 or most recent available)
• Confirm P&L statements match the figures in the business tax returns (discrepancies are a red flag)
• Cross-reference revenue figures against BAS lodgements for each quarter
• Identify which accounting basis is used (cash vs accrual) — note this affects timing of revenue and expenses
• Confirm whether GST is included or excluded in the reported revenue figures
• Verify that depreciation and amortisation figures are broken out separately from operating expenses
• Confirm the reported EBITDA figure: Revenue minus operating expenses, before interest, tax, depreciation, and amortisation
• Note any year where accounts were prepared by a different accountant — ask why

Baseline EBITDA to normalize: $________ (use the most recent full year as your starting point, note any major year-on-year swings)

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Phase 2: Owner Salary & Remuneration Add-backs

This is almost always the largest adjustment category for small business acquisitions.

• Identify the owner's total remuneration: wage/salary + superannuation + fringe benefits + distributions
• Determine the market rate for a replacement manager doing the owner's role (get 2-3 comparable job postings from Seek)
• Add back: Any amount the owner paid themselves below market rate (the difference increases normalized EBITDA)
• Deduct: Any amount the owner paid themselves above market rate (the difference reduces normalized EBITDA)
• If owner took zero salary and distributions instead: confirm actual hours worked per week, determine market equivalent salary, adjust accordingly
• Identify all family members on payroll
  • Confirm each family member's role and actual hours worked
  • Confirm each is paid at or near market rate for their role
  • Remove or adjust: Any family wages that are above-market or for roles that wouldn't exist under a new owner
• Confirm superannuation contributions for owner and family — note whether these are consistent across years
• Check for director's fees paid in addition to salary — confirm these appear in the business P&L

Net owner remuneration adjustment: $________ (positive = add back to EBITDA, negative = deduct)

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Phase 3: Personal Expenses Run Through the Business

These are legitimate tax deductions for the current owner. Under a new owner, they don't exist — so add them back.

Vehicles:

• List all vehicles owned by the business or on a novated lease
• Identify any vehicles used primarily for personal travel
• Add back: Proportion of vehicle costs attributable to personal use (running costs, depreciation, lease payments)
• Check for vehicle-related FBT (fringe benefits tax) — this confirms personal use has occurred

Communication & technology:

• Review mobile phone expenses — personal-use proportion
• Review internet plans — home connections expensed through the business
• Review subscriptions: personal streaming services, non-business software, news subscriptions
• Add back: Personal portion of all communication and technology expenses

Travel & entertainment:

• Review travel expenses — separate business-critical travel from owner lifestyle travel
• Review meals and entertainment — identify recurring personal dining that's been categorised as "client entertainment"
• Review conference and seminar attendance — note which are directly business-relevant vs personal interest

Other personal expenses:

• Insurance — check for personal life or income protection insurance expensed through the business
• Professional memberships — identify those that are personal vs business-critical
• Home office — confirm any home office deductions are for a genuine, dedicated workspace
• Medical or personal health expenses run through the business

Net personal expense add-back: $________ (add to EBITDA)

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Phase 4: One-Off and Non-Recurring Items

Remove anything that won't repeat — in either direction.

Remove from revenue (one-off income that won't recur):

• Government grants or subsidies (JobKeeper, COVID-era payments, state grants)
• One-time consulting or advisory payments not related to core business
• Insurance payouts or legal settlements received
• Asset sales classified as revenue
• Tender wins or contracts that were genuinely one-off and won't repeat

Remove from expenses (one-off costs that won't recur):

• Legal and accounting fees related to the current sale process
• One-time equipment repair or replacement costs above normal maintenance
• Redundancy payments or restructuring costs
• Costs related to a specific event that won't repeat (flood, fire, equipment failure)
• Prior-year tax adjustments or ATO disputes that have been resolved

Run-rate adjustments:

• If the business has added a significant new contract in the last 6 months, confirm annualised revenue impact
• If the business has lost a client in the last 12 months, confirm annualised revenue impact
• If owner has raised prices recently, confirm impact on annualised revenue
• If a key staff member has left recently, confirm cost of replacement

Net one-off adjustment: $________ (positive = add to EBITDA if removing expense; negative = deduct if removing revenue)

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Phase 5: Trades-Specific Adjustments (Service Businesses in Australia)

These items are specific to plumbing, electrical, landscaping, cleaning, HVAC, painting, and similar trades businesses.

Labour and subcontractors:

• Confirm whether the owner's own labour hours are fully costed in the P&L — owner-operators often under-count their billable hours
• Review subcontractor costs — confirm these are arm's-length arrangements and not related-party payments
• Check for any cash wages paid (no PAYG withholding recorded) — note this as a compliance issue as well as a normalization issue
• Confirm superannuation obligations for casual or part-time workers are fully recorded

Equipment and tools:

• Review tools and equipment expensed vs capitalised — confirm the threshold used is consistent year-to-year
• Check for instant asset write-off items that were expensed in one year — these may need to be amortised across their useful life for normalization purposes
• Review vehicle fleet maintenance costs — identify any backlog of deferred maintenance that will cost the incoming owner

Licensing and compliance:

• Confirm all required trade licences are current and included in costs (new owner may need to obtain their own)
• Confirm workers compensation insurance is correctly calculated for the actual workforce
• Check for any pending compliance obligations (e.g. safety certifications, equipment inspections)

Materials and cost of goods:

• Compare cost of goods as a percentage of revenue across three years — significant variation warrants explanation
• Cross-reference with ATO small business benchmarks for the relevant industry (available at ato.gov.au)
• Confirm materials purchasing is through arm's-length suppliers, not related parties

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Phase 6: Calculate Normalized EBITDA

Complete this table after working through Phases 1–5.

Item	Amount ($)
Reported EBITDA (starting point)
+ Owner salary add-back (Phase 2)
− Market replacement manager cost (Phase 2)
+ Personal expense add-backs (Phase 3)
+ One-off expense removals (Phase 4)
− One-off revenue removals (Phase 4)
± Run-rate adjustments (Phase 4)
± Trades-specific adjustments (Phase 5)
= Normalized EBITDA

Normalized EBITDA: $________

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Phase 7: Sanity-Check the Result

Before using this number to calculate an offer price, test it.

• Does the normalized margin (EBITDA ÷ revenue) fall within the ATO benchmark range for this industry?
• Does the normalized EBITDA represent a sustainable figure that a professional manager could maintain without the current owner?
• Are there any adjustment items where you relied on the seller's word without third-party verification? (Flag these for due diligence)
• Have you reviewed 3 years of data — or only 1? (1-year normalization is not sufficient for a final offer)
• Have you had an independent accountant review your normalized figure before submitting a formal offer?

Indicative valuation range based on normalized EBITDA:

Multiple	Implied Price
2.0x	$________
2.5x	$________
3.0x	$________
3.5x	$________

Use the appropriate multiple range for the industry and quality of the business. See Module 4 of the Playbook for guidance on which multiple applies to your target business.

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Notes Section

Use this space to record adjustments you've identified but not yet verified, questions for the vendor, or items flagged for follow-up in due diligence.

Item	Estimated Impact	Status

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Next step: Once you have a normalized EBITDA you're confident in, use it alongside our comprehensive due diligence checklist to verify the assumptions underneath the number before you make a formal offer.

For a full walkthrough of how to apply normalized EBITDA to a purchase price, and how different multiples apply to different types of businesses, see Module 4 of the Playbook.

This checklist is for guidance only and does not constitute financial or legal advice. Engage a qualified accountant and business acquisition solicitor before finalising any acquisition.