Important: The CGT reforms in this article were introduced to Parliament on 28 May 2026 via the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. These measures are not yet law. A Senate review is underway. Seek tailored advice before making exit or restructuring decisions.
Most budget coverage has focused on property investors. Business owners planning to sell sit in a different category, and the news for them is considerably better than the headlines suggest. The small business CGT concessions that have long protected Australian business exits are fully preserved. The general CGT rules have changed substantially. For business owners who qualify for the concessions, that distinction determines the entire exit tax outcome.
The Four Small Business CGT Concessions the Budget Did Not Touch
The government explicitly confirmed the preservation of all four small business CGT concessions in Division 152. This appears in the official Budget factsheet and has been confirmed across every authoritative source, including the Bill itself.
To access the concessions, the business must meet one threshold test: aggregated turnover below $2 million, or net assets below $6 million. The asset must also pass the active asset test, held for use in carrying on the business for at least half the ownership period.
The four concessions:
- 15-Year Exemption: The entire capital gain is disregarded. The owner must have held the active asset for 15 or more years continuously, be aged 55 or over, and be retiring or permanently incapacitated. Tax liability is zero.
- 50% Active Asset Reduction: The capital gain is reduced by 50%. This stacks with the general CGT discount where it still applies, producing a combined 75% reduction on qualifying gains.
- Retirement Exemption: Capital gains up to a lifetime limit of $500,000 per individual are disregarded. Owners under 55 must contribute the exempt amount to a complying superannuation fund.
- Rollover Relief: The capital gain is deferred by reinvesting proceeds into a replacement active asset within a window of one year before to two years after the sale.
Why the Budget Made These Concessions More Valuable
Before the 2026 budget, the general 50% CGT discount provided a fallback for business sellers who did not qualify for the specific small business concessions. From 1 July 2027, that fallback is gone.
Under the proposed new regime, capital gains accruing after 1 July 2027 are taxed under cost base indexation. Only the inflation-adjusted real gain is taxable, and a 30% minimum tax floor applies to that gain. At a marginal rate of 47%, a $2 million capital gain faces a minimum tax of approximately $600,000 under the new rules. Under the old 50% discount, that same gain produced a tax liability closer to $470,000.
For business owners who qualify for the small business concessions, the proposed changes to the general regime are largely irrelevant. The concessions override the general rules. A business owner eligible for the 15-year exemption still exits with zero CGT. A business owner applying the retirement exemption still protects $500,000 of the gain entirely.
The gap between qualifying and not qualifying for the concessions has widened substantially. This is the central planning implication of the 2026 budget for business sellers.
What the Budget Changed for Business Sellers
For business owners who do not fully qualify for the concessions, the changes are material.
From 1 July 2027, the 50% CGT discount is replaced by cost base indexation for gains accruing from that date. A transitional mechanism applies: all CGT assets held at that date are deemed sold just before 1 July 2027 and reacquired on that date at market value. The pre-2027 portion of any capital gain continues to attract the 50% discount. The post-2027 portion is calculated under the new indexation regime with the 30% minimum tax floor.
For a business owner selling in 2030 after holding their business since 2010, the gain is split at the 1 July 2027 boundary. The pre-boundary gain is taxed under existing law. The post-boundary gain is taxed under the new regime.
Pre-CGT assets, those acquired before 20 September 1985, are also brought into the regime from 1 July 2027. Any gain accruing from that date becomes taxable. This affects a small but significant number of long-held business interests that currently carry no CGT liability.
If Your Business Is in a Discretionary Trust, Three Things Compound
Business owners holding their business through a discretionary trust face a specific set of compounding risks on a sale.
First, the post-2027 capital gains on the business assets face the new regime. The 50% discount disappears for gains accruing after 1 July 2027.
Second, from 1 July 2028, the 30% minimum tax on discretionary trust income applies at the trustee level. Sale proceeds distributed through the trust to beneficiaries after that date attract the minimum tax. The interaction between the small business concessions and the minimum trust tax is subject to ongoing consultation; details remain unfinished.
Third, the bucket company’s distribution strategy is eliminated. Corporate beneficiaries receive no credit for trustee-level minimum tax under the proposed rules. The double-taxation outcome confirmed in the Treasury factsheet applies to distributions to any company beneficiary.
Where the small business concessions apply fully, particularly the 15-year exemption, the gain is disregarded, removing these compounding risks from the calculation. Concession eligibility assessment is the first and most important step for any trust-held business owner planning an exit.
The 1 July 2027 Valuation Requirement Most Business Owners Have Not Heard About
The transitional mechanism creates a compliance obligation receiving almost no coverage outside specialist legal analysis.
The transitional mechanism requires a reliable market value for each CGT asset on 1 July 2027. This value determines the split between pre and post-boundary gains. For a business with goodwill, customer lists, or intellectual property, which describes most small businesses, that valuation is not simple.
PwC’s analysis of the Bill states the position directly: contemporaneous valuation evidence is the most defensible. Obtaining reliable market valuations retrospectively becomes harder as years pass. A business owner who sells in 2029 and attempts to establish a 2027 market value after the fact faces real ATO challenge risk.
Business owners planning to sell after 1 July 2027 who will not fully exit under the concessions should obtain a documented market valuation before that date. This is a near-term action item, not a post-legislative step.
What Business Owners Should Do Now
Test concession eligibility. The active asset test, the maximum net asset value test, and the 15-year ownership condition all carry specific requirements. A business that appears to qualify may fail on an associated entity inclusion or an asset classification issue. Identifying those gaps now allows time to address them.
Obtain a market valuation before 1 July 2027. For businesses that will not fully exit under the concessions, the split calculation requires a defensible 1 July 2027 value. Commission that valuation before the date.
Review the structure of trust-held businesses. The rollover relief window opens on 1 July 2027 and closes on 30 June 2030. That window provides CGT and income tax-free restructuring from a discretionary trust into a company or fixed trust. State stamp duty is not covered and must be assessed separately.
Frequently Asked Questions
Are the small business CGT concessions confirmed as preserved?
Yes. The government explicitly confirmed that all four concessions remain unchanged. This is confirmed in the Budget factsheet, the Bill text, and the Treasury document on CGT reform. The concessions apply regardless of the new general CGT rules.
Does the 30% minimum trust tax apply to business sale proceeds distributed through a trust?
The interaction between the concessions and the minimum trust tax is subject to ongoing consultation and is not yet finalised. Where the 15-year exemption applies and the gain is fully disregarded, the minimum trust tax applies to other trust income, not the exempt gain.
Do I need a market valuation on 1 July 2027 if I qualify for the 15-year exemption?
Not necessarily. Where the entire gain is disregarded under the 15-year exemption, the split calculation produces zero tax on both components. The valuation requirement is most significant for sellers who will only partially qualify for the concessions.
When does the restructuring rollover relief open for trust-held businesses?
The rollover relief window opens on 1 July 2027 and remains available for three years to 30 June 2030. It provides income tax and CGT relief on the transfer of business assets from a discretionary trust to a company or fixed trust. State stamp duty is not covered by the Commonwealth rollover.
The Business Exit Decision That Cannot Wait
The 2026 Federal Budget did not dismantle the framework that protects small business exits in Australia. The four concessions that allow eligible business owners to exit with significantly reduced or zero CGT remain fully intact.
For business owners who qualify fully, the budget’s changes to the general CGT regime are largely irrelevant. For those who qualify partially, or who hold their business inside a discretionary trust, the planning implications are material, and the action items are time-sensitive.
The 1 July 2027 boundary is the planning line. The valuation decision, the concession eligibility test, and any trust restructuring decision must all occur before that date.
Blackwattle Tax advises innovative Australian businesses on tax-efficient exit planning, CGT concession eligibility, and business structuring. Book a complimentary 30-minute business exit strategy session with Blackwattle Tax before the 2027 boundary.
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Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature. You should seek the assistance of a professional opinion for any legal and tax issues related to your personal circumstances.