The Federal Budget contains some of the most significant tax changes for business owners in a generation. Whether you operate through a company, trust, or as a sole trader — and whether you are in growth mode, planning your exit, or somewhere in between — there are measures in this Budget that directly affect you.
We have prepared this briefing specifically for business owners, because the implications of these changes are more complex than a general summary can capture.
Some changes offer genuine opportunities — particularly for businesses that have struggled recently or are planning for growth.
Others, particularly the CGT and trust changes, require careful structural thinking before they take effect.
Capital Gains Tax - A Major Change for Business Owners
The most significant change in this Budget for business owners is the replacement of the 50% CGT discount with cost base indexation, plus a 30% minimum tax on net capital gains — effective for gains arising from 1 July 2027.
For business owners, it is potentially transformational — because of one specific issue: GOODWILL
The "Goodwill" Problem
When you build a business from scratch, the goodwill that develops over time has a cost base of zero.
You did not pay for it — you created it.
Under the current rules, the 50% CGT discount applies when you sell, meaning half of the goodwill gain is tax-free. Under the new rules, cost base indexation adjusts your original cost base for CPI — but if the cost base is zero, there is nothing to index.
Every dollar of goodwill gain arising after 1 July 2027 is fully taxable, subject to the 30% minimum tax.
In practical terms:
The tax on goodwill that accrues after 1 July 2027 is roughly double what it would have been under the current rules.
Small Business CGT Concessions Stil Apply — But are they Worthless
The Small Business CGT Concessions — the 50% active asset reduction, the $500,000 lifetime retirement exemption, and the 15-year exemption — remain available.
However, because the new rules result in a larger starting gain (particularly on zero-cost goodwill), the concessions are applied to a higher base. T
heir effective value is eroded.
The Transitional Rules
Gains accruing up to 30 June 2027 are still subject to the current rules — including the 50% discount.
If you are considering selling your business in the next 1 to 3 years, the timing of that sale relative to 1 July 2027 could make a material difference to your tax position.
What this means for you:
If you are thinking about selling your business — whether in the next year or the next five — the CGT changes make it more important than ever to model the tax outcome under different timing scenarios.
Changes to Discretionary Trusts
The Government has announced a 30% minimum tax on discretionary trusts, proposed to start from 1 July 2028.
This is designed to limit the tax benefit of distributing trust income to beneficiaries on lower tax rates.
Current Rules Compared to the Proposed Rules
Under the proposal, the trustee pays a minimum of 30% tax on the trust's taxable income before it is distributed.
Individual beneficiaries — other than corporate beneficiaries — receive a non-refundable credit for the tax paid, similar to a franking credit on a share dividend.
Below is an illustrated example of the Current V Proposed tax consequences.
| Existing Rules | Proposed Rules (From 1 July 2028) | |
|---|---|---|
| Who pays the Tax? | Beneficiary - at their own Marginal Tax Rates | Trustee pays Minimum 30% Tax |
| Beneficiary on $20,000 (no other income) | $288 Tax* | Trust Paid $6,000(30% of $20,000). Permanently Lost $5,712 from the $288 otherwise owed |
| Beneficiary on $100,000 (only income) | $24,632 Tax* | Trust Paid $30,000(30% of $100,000). Permanently Lost $5,3682 from the $24,632 otherwise owed |
| Breakeven Point | Not Applicable | Approx $131,600 total income- at that level of credit and liability roughly match |
Note: All figures are illustrative and based on 2025–26 tax rates. Subject to final legislation.
The Corporate Beneficiary Problem
If your trust distributes income to a company — sometimes called a bucket company — the situation is more serious.
The Budget announcement states that corporate beneficiaries will not receive the same non-refundable credits as individual beneficiaries.
Based on the announcement as it stands, this means:
- The trust pays 30% minimum tax on income distributed to the company.
- The company then pays company tax — 25% or 30% — on that same income, with no credit to offset the tax already paid by the trust.
- The combined effective tax rate on those distributions could approach 55–60%.
If your trust distributes income to a company:
This is a significant risk that requires urgent review.
Which Trusts are NOT Affected
The following types of trusts are excluded from the proposed minimum tax:
- Fixed trusts and widely held trusts (including fixed testamentary trusts)
- Complying superannuation funds
- Special disability trusts
- Deceased estates
- Charitable trusts
Certain types of income are also excluded, including primary production income, income relating to vulnerable minors, and income from assets of discretionary testamentary trusts existing at the time of the announcement.
What this means for you:
If you operate through a discretionary trust or as a sole trader, please contact us to arrange a structure review.
We can assess what your business is worth today, model the tax outcomes under different structures, and help you determine whether acting in the rollover relief window from 1 July 2027 is the right move.
Is Your Business Structure Right For You?
The CGT changes, combined with the proposed discretionary trust minimum tax (see below), make the question of business structure more important than it has been in 25 years.
Two questions are worth asking now:
Are you operating through the right entity?
If you run your business as a sole trader or through a discretionary trust, the combination of the CGT changes and the trust minimum tax may mean a company or fixed trust structure produces a significantly better outcome at the point of sale — and potentially before it.
For businesses with growing goodwill value, this is not a minor consideration.
The difference in tax between the right and wrong structure, over a 10-year holding period, can be very large.
The Rollover Relief Window
The Budget confirms expanded rollover relief for three years from 1 July 2027.
This allows businesses to restructure out of a discretionary trust into a company or fixed trust without triggering a CGT liability at the time of the transfer.
The window runs from 1 July 2027 to 30 June 2030.
Cautions:
However, stamp duty on the transfer of assets remains a state-based tax and will still apply in most states.
This is a real upfront cost that needs to be factored into any restructure decision.
And the decision cannot be made sensibly until the legislation is released — which is expected in the second half of 2026.
What this Means for You
This Budget has created both urgent obligations and genuine planning opportunities for business owners. Our recommendation is:
- Arrange a structure review meeting with us if you operate through a trust or as a sole trader — the restructure planning must begin before the rollover window opens in July 2027.
- We can assess what your business is worth today, model the tax outcomes under different structures, and help you determine whether acting in the rollover relief window from 1 July 2027 is the right move.
- Do not make any immediate changes to trust distributions or arrangements pending release of the trust minimum tax legislation.
We will be in touch with clients we believe are most directly affected.
Please do not wait to hear from us if you have questions or want to talk through your situation.
Other Federal Budget 2026/27 Blogs
Click here to view our Blog on The Budget's Changes to Individual Tax Measures
Click here to view our Blog on The Budget's Changes to Property Investors and Negative Gearing
Click here to view our Blog on The Budget's Changes to Capital Gains Tax
Click here to view our Blog on The Budget's Changes to Business
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