Thinking About Selling Your Business? The Clock Just Started

There are social media posts doing the rounds from founders who feel like the government is a 47% silent co-founder. They are likely more right than they realise — and after the 2026 budget, this is about to get even more right for anyone who doesn’t act now.

The 2026 Federal Budget proposed to abolish the 50% Capital Gains Tax discount. For founders, startup employees with equity, and business owners thinking about exiting in the next few years, this is the single most significant tax change in over 25 years.

This article explains what changed, who it hits hardest, and what the three planning windows look like between now and 2030.

Important

The CGT reforms are budget announcements — not yet law. All planning should account for the possibility of changes before legislation passes. Your Fullstack advisor will keep you updated as this progresses.

What Happened to the 50% CGT Discount?

Under the rules that applied until Tuesday night, if you owned an asset for more than 12 months before selling — including shares in your own business — you only paid Capital Gains Tax on half the gain. At the top marginal rate of 47%, that translated to an effective CGT rate of 23.5%.

From 1 July 2027, that discount is gone. It is being replaced by a cost base indexation model (taxing only ‘real’ gains after inflation), plus a new 30% minimum tax rate on gains. For a high-growth business, inflation indexation is close to worthless — your cost base was small and your gains are large.

Note: Top marginal rate (47% incl. Medicare levy). Assumes no SBCGT concessions. Individual circumstances vary.

Who Gets Hit Hardest?

Startup Founders and ESOP Participants

This is where the new rules are particularly brutal. Startup shares typically have a very low cost base — often near-zero for founders, or set at a small exercise price for ESOP participants. Inflation indexation from a near-zero base provides almost no relief. The gain is essentially fully taxed at up to 47%.

The government acknowledged this specific problem and flagged a consultation process for early-stage and startup businesses. However, no timeline has been set and no details have been released. Our advice: do not plan around a startup carve-out until it is law.

Business Owners Who Don’t Qualify for Small Business CGT Concessions

The four small business CGT concessions survived the budget and remain powerful. But to access them, you must pass one of two tests:

Aggregated annual turnover under $2 million, OR
Combined net assets under $6 million — across you, your business, and all related entities and associates (excluding your home and super). At a $20M valuation, you fail this test on the business value alone.

A business valued at $10M, $20M, or more will almost certainly fail both tests. That means the concessions are unavailable — and the new CGT regime hits in full.

Business Owners in Discretionary Trusts

If your business equity is held in a discretionary trust, you face a two-headed problem: the CGT discount removal from 2027, and the new 30% minimum tax on discretionary trust distributions from 2028. Both apply simultaneously.

Employees with Vested ESOP Shares

Startup employees who worked nights and weekends in exchange for equity are in the same position as founders. Their cost base is low, their gain may be significant at exit, and the discount they were counting on has just been removed. The government’s consultation on this is welcome — but cold comfort for anyone planning a near-term exit.

The Three Planning Windows

How you approach exit planning now depends on which window you are in. Here is the framework we are applying with clients.

Window 1 — Before 30 June 2027: The Full 50% Discount

Any sale that completes before 1 July 2027 retains the full 50% CGT discount in its entirety. No transition. No hybrid calculation. The old rules apply.

The Highest-Value Outcome

If your business is saleable, if a deal is achievable, and if the price is right — completing before 30 June 2027 is by far the most tax-efficient outcome. The difference for a $10M gain is approximately $2.35M in additional tax avoided.

This does not mean accepting a bad deal to beat a tax deadline. But if you have been thinking about selling in the next two to three years, that timeline now has a very large number attached to it. The decision to wait is a decision to potentially pay millions more in CGT.

Actions to consider now:

Engage an M&A advisor or business broker to understand what a realistic sale timeline looks like
Get an independent business valuation — understanding your current value shapes everything else
Review your structure — who holds the shares, via what entity, and what concessions might apply
Talk to your advisor about whether a pre-2027 sale is achievable and what preparation is required

Window 2 — 1 July 2027: The Valuation Opportunity

If you are not selling before 2027, the next most important action is obtaining a formal, independent business valuation as at 1 July 2027. Here is why.

Under the hybrid transitional rules, gains on assets held across the 1 July 2027 boundary are split into two periods:

Gain from cost base to the asset’s value on 1 July 2027 → taxed under the old rules (50% CGT discount applies)
Gain from the 1 July 2027 value to eventual sale price → taxed under the new regime (indexation only, 30% minimum tax)

The government will provide an ATO growth rate formula as an alternative to a formal valuation. We strongly recommend engaging a qualified valuer for any asset of material value — the cost is trivial relative to the potential tax saving, and a formal valuation is more defensible in an ATO review.

Note: This window is approaching in just over 13 months. Valuation firms will be busy. Start the conversation now.

Window 3 — 1 July 2027 to 30 June 2030: The Restructure Window

For business owners who hold equity in a discretionary trust and are not selling in the near term, the government has provided a three-year rollover relief window from 1 July 2027 for those who wish to restructure.

The primary play here is restructuring from a discretionary trust into a fixed or unit trust structure. This achieves two things:

Avoids the 30% minimum tax on discretionary trust distributions from 2028 for ongoing profit repatriation
May provide a cleaner structure for a future exit or investor round

Critical Caveats

Rollover relief eligibility conditions are not yet legislated. The restructure itself may trigger state stamp duty. Simply moving assets between trust structures is not a CGT elimination — the deferred gain is still waiting when you eventually sell. Do not proceed with any restructure without formal tax advice.

What About Small Business CGT Concessions?

If your business qualifies — turnover under $2M, or combined net assets under $6M across you, your business, and all connected entities and associates (excluding your home and super) — the concessions survived the budget in full and remain the most powerful CGT tool available, regardless of the new regime.

Scenario	Approx. Tax	Effective Rate
$1M gain — pre-July 2027	$117,500 CGT	23.5% effective rate (50% discount)
$1M gain — post-July 2027	$470,000+ CGT	47%+ effective rate (new regime)
$5M gain — pre-July 2027	$587,500 CGT	23.5% effective rate
$5M gain — post-July 2027	$2,350,000+ CGT	47%+ effective rate

Concession	How It Works	Outcome
15-year exemption	Full CGT exemption after 15+ years of active ownership	Complete elimination of CGT
Active asset reduction	50% reduction on the capital gain	Halves the taxable gain
Retirement exemption	Exclude up to $500k lifetime from CGT (into super or direct)	Up to $500k tax-free
Rollover	Defer gain by rolling into a replacement active asset	Deferral only — not elimination

These can be stacked. A qualifying founder could apply the active asset reduction (50%) and then the retirement exemption ($500k) to significantly reduce or eliminate CGT on a business sale.

The key question: do you still qualify? The $6M net assets test sweeps up all connected entities and associates — not just the business being sold. A founder with a $5M business, a rental property, and a spouse’s trust may already be over the threshold without realising it. Check this now, before the sale is in progress.

The Summary: What to Do and When

Your Situation	When to Act	Action
Sale possible before 30 June 2027	Immediately	Engage M&A advisor, get a valuation, confirm structure. Every month matters.
Sale not imminent — hold into 2027+	Now & June 2027	Commission a formal business valuation as at 1 July 2027. Lock in as much gain as possible under the old rules.
Equity in a discretionary trust	Now	Model the 2028 minimum tax impact. Review whether restructuring into a fixed trust from July 2027 makes sense.
Unsure if SBCGT concessions apply	Now	Run the eligibility tests. Do not assume — a missed concession is an enormous cost.
ESOP participant / startup employee	Now	Understand your vesting schedule, exercise price, and holding period. Seek advice before assuming the CGT discount applies to you.

The 2026 budget is a genuine inflection point for anyone with business equity in Australia. The strategies that preserve wealth for you and your shareholders exist — but the window to use the most powerful of them is 13 months long.

Talk to Fullstack Advisory

We specialise in accounting and advisory for Australian tech founders, investors and growth-stage businesses. If you want to work through what these changes mean for your situation reach out.

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The information provided in this article is general in nature and does not constitute specific tax, financial or legal advice. While we strive for accuracy, this content should not be relied upon without considering your particular circumstances. Any action taken based on this information should be confirmed with appropriate professional guidance.

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Accounting & Tax Startups

15 May 2026

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