Capital Gains Tax (CGT) is often only considered when an asset is sold, whether that is property, shares, a business asset or a long-held investment.
However, the new CGT reforms make earlier planning important. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, with key changes applying from 1 July 2027. [1]
For business owners and investors, the way future capital gains are calculated may change. This should be considered well before a sale.
What is changing?
From 1 July 2027, the 50 per cent CGT discount for individuals, trusts and partnerships will generally be replaced by cost base indexation and a 30 per cent minimum tax rate on real capital gains. [2]
Instead of automatically reducing an eligible gain by 50 per cent after an asset has been held for more than 12 months, the cost base will generally be adjusted for inflation.
The aim is to tax the real gain rather than the portion caused by inflation.
The practical impact will vary.
Some taxpayers may pay more and others may pay less.
The result will depend on the asset, holding period, inflation, growth in value and the taxpayer’s marginal tax rate. Strong records and planning will be important.
Will this apply to existing assets?
Yes, but the reforms will only apply to gains accruing from 1 July 2027.
For assets owned before that date and sold later, the gain will generally be divided between the current rules for the period before 1 July 2027 and the new rules for the period after it.
This makes 1 July 2027 an important reference date.
A valuation at that date may be useful for some assets. Taxpayers may also be able to use an apportionment method, with ATO guidance and tools expected to assist.
Getting organised early may make it easier to support the value used when an asset is eventually sold.
What assets are affected?
The changes broadly apply to eligible CGT assets held for at least 12 months by individuals, partnerships and trusts, including property and shares. [3]
For many business owners, this means the reforms could be relevant to:
- Investment properties
- Share portfolios
- Interests in trusts or partnerships
- Certain business assets
- Long-held investment assets
The main residence exemption will continue where the usual conditions are met. The four small business CGT concessions will also remain. From 1 July 2027, the turnover threshold for the small business 50 per cent active asset reduction is set to increase from $2 million to $10 million. [4]
This may expand access for some business owners, but eligibility must still be carefully tested.
Proposed carve-out for founders and early investors
The Government has proposed a new Innovative Business CGT Concession for early-stage investors, including founders and employee share scheme participants. This carve-out is not yet law and its final design may change.
Under the proposal, individuals, partnerships and trusts holding eligible shares could choose between a 50 per cent CGT discount or cost base indexation and the 30 per cent minimum tax for gains accruing from 1 July 2027.
The current design suggests eligible shares would need to be new equity in an innovative company generally less than 10 years old, with turnover below $50 million. The shares would generally need to be held for at least five years and the concession would be subject to a lifetime cap. Some longer-commercialisation sectors may qualify where the company is up to 15 years old.
When could this become law?
Treasury consultation closed on 10 July 2026 and the feedback will inform the final design. The Government has said the concession will be included in a later tranche of tax reform legislation. As at 13 July 2026, that legislation has not been introduced and there is no confirmed date for it to pass Parliament or receive Royal Assent. The proposed start date is 1 July 2027, but this will only take effect if the legislation is passed.
Why this matters for business owners
CGT is often treated as a future problem but planning works best when it starts early.
Business structure, record keeping, asset ownership, sale timing and available concessions can all affect the after-tax outcome.
This may be relevant if you plan to sell a business or investment property, restructure an entity, transfer assets or bring in investors.
The risk is assuming the current rules will continue to produce the same result.
What should you do now?
The first step is clarity, not panic.
Business owners and investors should review:
- What assets they currently hold
- Which entities hold those assets
- Whether any assets may be sold after 1 July 2027
- Whether a 1 July 2027 valuation may be needed
- Whether small business CGT concessions could apply
- Whether the current structure is still appropriate
- Whether future sale or succession plans need updating
Good advice is not only about tax. It is about understanding your position before major decisions are made.
How Falanga & Co can help
At Falanga & Co, we help business owners understand the numbers before major decisions are made.
The reforms will not require every business owner to change course, but existing assumptions should be reviewed.
If you hold investment assets or are considering a future sale, now is the time to review your structure and plan ahead.
If you are unsure how this impacts your business, get in touch to find out how we can help.
Reference links
[1] Treasury Laws Amendment (Tax Reform No. 1) Act 2026
[2] Budget factsheet: Negative Gearing and Capital Gains Tax Reform
[3] Treasury: Capital Gains Tax and Discretionary Trusts Reform
[4] Prime Minister: Tax reform implementation for small business and startups
| General information only. This should not be treated as personal tax advice. Speak with your advisor before making decisions. |
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