What business owners should consider before their next exit, succession event or restructure
Australia’s capital gains tax rules are entering their most significant period of change in years. For owners of substantial private businesses and investment structures, 30 June 2027 is not necessarily a deadline to transact – but it is a critical valuation, modelling and documentation date.
At a glance
From 1 July 2027, the 50% CGT discount for Australian resident individuals and trusts is replaced by cost base indexation, together with a 30% minimum tax on certain real capital gains. The reforms are prospective, but transitional rules mean the value of existing assets at 30 June 2027 can become central to determining the future tax outcome.
What is changing?
The first tranche of the reforms has been enacted. Broadly, for relevant CGT events from 1 July 2027, the existing 50% discount framework for individuals and trusts gives way to an inflation-based approach. Eligible cost base expenditure is indexed, so the taxable gain is intended to reflect the increase in value above inflation. A minimum 30% tax rate also applies to relevant real capital gains accruing from 1 July 2027.
Importantly, the Government has designed the changes to operate prospectively. Value accrued before 1 July 2027 is intended to remain subject to the existing settings. This is why the transition mechanism – and the evidence supporting asset values at the transition date – matters so much.
Further design detail is still being implemented through later legislation. Businesses should therefore distinguish between the core reforms already enacted and elements that remain subject to final legislative detail.
Why 30 June 2027 matters
For assets already held at the transition date, the rules generally require a division between value accrued before and after 1 July 2027. Depending on the asset and applicable transition method, a market value at 30 June 2027 may be central to that calculation. In practical terms, this elevates valuation from a transaction-day exercise to a tax governance issue that should be planned well in advance.
This is particularly important for assets for which there is no readily observable market price, including:
- founder shares and interests in privately owned companies;
- internally generated goodwill and other business intangibles;
- long-held family business interests;
- units or interests in private investment structures;
- pre-CGT assets that are brought prospectively within the CGT framework; and
- assets likely to feature in a future succession, restructure or sale process.
Low cost-base assets deserve particular attention
The move from a flat percentage discount to cost base indexation changes the economics for assets with a very low historical cost base. Founder shares and internally generated goodwill are obvious examples. Where the underlying cost base is small, indexing that cost base may provide materially less relief than a 50% discount would have provided under the current regime.
That does not mean a pre-1 July 2027 disposal will always produce a better result. The outcome will depend on the asset, ownership structure, available concessions, transaction timing, expected future growth, inflation and the owner’s broader tax profile. Modelling should therefore precede any decision to accelerate a transaction.
Is 30 June 2027 a transaction deadline?
Not generally. Tax should not displace commercial considerations, and a rushed sale or restructure can create costs and risks that outweigh any tax benefit. However, where an exit, succession event or restructure is already commercially contemplated, the reforms make transaction timing a legitimate modelling question.
The practical question
For many groups, the immediate task is not “should we sell before 30 June 2027?” It is “what will our after-tax position look like under each timing scenario, and what evidence do we need to preserve the pre-1 July 2027 value of our assets?”
What should private groups be doing now?
- Identify material CGT assets across the group and determine which assets are likely to require transition-date valuation evidence.
- Review existing asset registers, acquisition records, historical restructures and cost-base documentation. Gaps are easier to address before a transaction is underway.
- Model contemplated exits, ownership changes and succession arrangements under both the current and post-1 July 2027 settings.
- Plan independent valuations for material unlisted businesses, shares and intangible assets where a 30 June 2027 market value may be relevant.
- Review whether existing small business CGT concessions or other rollovers may apply; those concessions have not simply disappeared under the reform package.
- Avoid implementing transactions solely to meet a tax date without considering duty, Division 7A, trust, financing, legal and commercial consequences.
Implications for business sales and succession
For owners considering a sale in the next several years, the reform should become part of transaction readiness. The relevant work may include normalising financial information for valuation purposes, documenting ownership history, identifying the tax cost base of shares and underlying assets, and testing whether a share sale, asset sale or pre-sale restructure produces materially different outcomes.
Succession planning may require the same discipline. A transfer to the next generation, a family reorganisation or a restructure ahead of external investment can crystallise CGT consequences even where no cash sale occurs. The new rules increase the importance of modelling those steps before documents are signed.
Our view
30 June 2027 should be treated as a planning and evidence date, not automatically as a deadline to complete transactions. For substantial private groups, the priority is to understand where material unrealised value sits, establish defensible valuation evidence and compare the after-tax outcomes of transactions that are genuinely under consideration. Groups that wait until an eventual sale process may find that reconstructing the 30 June 2027 position is considerably more difficult.
How we can assist
We can assist private groups and business owners with transition-date tax modelling, transaction and succession scenario analysis, CGT cost-base reviews, valuation coordination and the tax structuring of proposed exits or reorganisations.
