How the Proposed 2026 Budget CGT Changes Could Affect the Future Sale of Your Business

For many business owners, selling the business is expected to fund retirement or the next stage of life. However, the sale price isn’t necessarily the amount the owner will ultimately retain.

The proposed capital gains tax changes announced in the 2026-27 Federal Budget could affect that outcome for some business owners from 1 July 2027.

The proposals may change through consultation and changes to legislation. However, owners considering a sale, succession or retirement should understand what has been announced and consider whether their current plans still produce the result they need.

What is proposed from 1 July 2027?

Under the current rules, eligible individuals and trusts can generally apply a 50% CGT discount to capital gains on assets held for at least 12 months.

The Government has proposed replacing this discount with:

• Indexation of the asset’s cost base to account for inflation
• A minimum 30% tax rate on real capital gains arising from 1 July 2027

A real capital gain is the increase in value after allowing for inflation. The effect of the proposed rules will depend on factors including the asset sold, the ownership structure, the owner’s tax position and eligibility for other CGT concessions.

What happens to gains made before 1 July 2027?

Under the proposal, gains that have accrued before 1 July 2027 would retain the existing 50% CGT discount treatment where the current eligibility requirements are met, even if the business is sold later.

For a business sold after the proposed commencement date, the gain may therefore need to be divided between:

• Value created up to 1 July 2027
• Value created after 1 July 2027

This could make a reliable business valuation around the changeover date particularly important. Without a supportable valuation, it will be nearly impossible to establish how much of the gain arose under each set of rules.

Does this mean you should sell before July 2027?

Not at all. Tax should be considered as part of a sale decision, but it shouldn’t determine the timing on its own. Rushing a business to market could mean accepting a lower offer or selling before its financial performance, systems and management team are ready for buyer scrutiny.

A stronger business sold later will leave the owner with a better result, even if part of the gain receives different tax treatment.

The practical step is to compare different scenarios. That may include a sale before and after 1 July 2027, different sale values and the likely tax outcome under each option.

Business value is not the same as after-tax proceeds

An owner may expect a business worth $5 million to provide $5 million towards retirement. The amount ultimately available personally may be considerably lower.

The final result can be affected by:

• Capital gains tax and other tax liabilities
• Business debt that must be repaid
• Legal, accounting and transaction costs
• Employee Entitlements
• The ownership structure
• Whether the buyer purchases the business assets, shares or units
• Eligibility for the small business CGT concessions
• Where the sale proceeds are received and how they can be accessed

This is why an old business valuation or retirement target may no longer provide the full picture. The more useful question is not only, “What is my business worth?” but, “How much would I retain after the sale?”

How does the ownership structure affect a sale?

A business may be operated through a company, trust, partnership or individual structure. Another entity may own the premises or other significant assets used by the business.

The tax outcome can differ depending on which entity owns the asset and whether the transaction involves the sale of business assets, shares or units.

A structure that supported the business during its growth may not produce the preferred outcome when it is sold. However, restructuring shortly before a sale can create additional tax, duty, legal and commercial consequences.

The ownership structure should therefore be reviewed well before negotiations with a buyer begin.

Could the small business CGT concessions still apply?

The existing small business CGT concessions may still reduce, defer or eliminate some or all of a capital gain for eligible business owners.

These include:

• The 15-year exemption
• The 50% active asset reduction
• The retirement exemption
• The small business rollover

Eligibility depends on detailed conditions involving matters such as turnover or net asset value, ownership periods, the use of the asset and the individuals connected with the business.

Owners shouldn’t assume they will qualify simply because they operate a small or privately owned business. Eligibility needs to be checked against the particular business, ownership structure and proposed transaction.

What should business owners review now?

The proposed changes do not mean every owner needs to sell or restructure. They do mean that business owners planning an exit should test whether their current strategy remains suitable.

Useful steps include:

1. Updating the business valuation and considering the importance of a supportable value at 1 July 2027.
2. Confirming which entities own the business, shares, premises and other major assets.
3. Reviewing likely eligibility for the small business CGT concessions.
4. Modelling sale timing, transaction structure and estimated after-tax proceeds under different scenarios.
5. Comparing those proceeds with the amount required for retirement or other personal goals.
6. Revisiting the succession or exit plan and identifying what could improve the business’s future value and saleability.

At Sharp Accounting, we help established business owners understand how their structure, business value and potential tax position connect with their succession, sale and retirement plans. Every business owner will eventually need to decide what happens to the business.

Contact us to find out how the proposed CGT changes could affect what you ultimately retain from a future sale or transfer, and how we can help you plan for it.

The proposed measures have not yet become law and may change through consultation and legislation.