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Tax & Succession

Budget 2026 may change the questions family business owners need to ask

The Budget does not tell every owner to sell. It does create a reason to test whether the old succession plan still works.

Budget 2026 may change the questions family business owners need to ask

If you were planning to sell, transfer or restructure your family business in the next few years, the 2026 Federal Budget may have changed the questions you need to ask — even if your business itself has not changed.

This is not a reason to panic. It is not a reason to rush into a sale or restructure.

It is a reason to re-run the numbers.

The issue is not simply “will I pay more tax?” The better question is:

Does my current sale timing, ownership structure and reinvestment plan still make sense if the announced Budget measures become law?

That question matters because succession planning is not just about who takes over. It is about what the owner keeps after a sale, whether waiting still pays, whether the structure is deal-ready, and where family capital can sensibly go next.

General information only — not financial, legal, or tax advice. The measures discussed below are announced/proposed Budget measures and may change through consultation, legislation and ATO guidance. Business owners should speak with their accountant, lawyer and qualified financial adviser before making decisions.

The Budget facts: what has been announced

The primary source is Budget Paper No. 2, not the law firm or accounting commentary around it.

On capital gains tax, Budget Paper No. 2 says that from 1 July 2027 the 50% CGT discount will be replaced by cost-base indexation for assets held for more than 12 months, with a 30% minimum tax on net capital gains. The Budget papers say the changes would apply to all CGT assets, including pre-1985 CGT assets, held by individuals, trusts and partnerships.

The Budget papers also describe transitional arrangements. In broad terms, gains arising before 1 July 2027 would continue to receive existing treatment, and gains on pre-1985 assets before that date would remain exempt. Gains after that date would be dealt with under the proposed new rules.

On negative gearing, Budget Paper No. 2 says that from 1 July 2027 losses from established residential properties would only be deductible against rental income or capital gains from residential properties. Excess losses could be carried forward. The proposed change applies to established residential properties acquired from 7:30pm AEST on 12 May 2026, with earlier acquisitions and contracts exempt until disposal.

On discretionary trusts, Budget Paper No. 2 says that from 1 July 2028 trustees would pay a 30% minimum tax on the taxable income of discretionary trusts. Beneficiaries, other than corporate beneficiaries, would receive non-refundable credits for tax paid by the trustee.

The Budget papers also say the Government will provide expanded rollover relief for three years from 1 July 2027 for small businesses and others that wish to restructure out of discretionary trusts into another entity type, such as a company or fixed trust.

Those are the announced Budget measures. The commercial question is what they may do to owner behaviour.

Why this matters for succession

For a family business owner, a succession decision is usually a mix of commercial, tax, family and personal questions:

  • Should I keep operating the business?
  • Should I sell now, later, or in stages?
  • Should ownership pass to children, management or an external buyer?
  • Is the current trust or company structure still fit for purpose?
  • If I sell, what do I actually keep after tax and transaction costs?
  • Where do the proceeds go?
  • What risk am I still carrying by waiting?

The Budget may affect those questions because it changes the assumptions around capital gains, discretionary trusts and some reinvestment options.

That does not mean every owner is worse off. It does not mean every owner should sell before a transition date. For many business owners, existing small business CGT concessions may be more important than the general CGT discount.

The 15-year exemption, retirement exemption, active asset reduction, small business rollover, active asset test, maximum net asset value test, turnover test and company/trust stakeholder rules can all materially affect the result. The Budget summary alone is not enough to know the tax outcome of a business sale.

The point is simpler: if the tax and investment assumptions around a future exit may change, the old succession plan should not be treated as settled without fresh modelling.

What Gilbert + Tobin gets right about the commercial signal

Gilbert + Tobin’s article, The new rules of the game: what the 2026–27 Federal Budget means for private capital in Australia, is useful because it does not treat the Budget as a narrow tax update.

G+T describes the Budget as “the most consequential for Australian private capital in generations” and says it is “an interlocking package of measures that reshape the after-tax economics of Australian private capital.”

That article is written for private capital investors, fund managers and dealmakers. Family business owners are not the same audience. But the underlying commercial point translates well:

If the after-tax economics of capital change, sale timing, valuation, structure and reinvestment choices may change too.

A family business owner may not care about carried interest or fund structures. But they do care about what they keep after a sale, whether a buyer sees the structure as clean, whether a family trust still works as intended, and whether waiting another three years is worth the risk.

That is why the Budget matters for succession.

Your walk-away number may need to be re-tested

Owners often think about value as a headline price: “I want $10 million for the business.”

But a $10 million offer is not a $10 million outcome.

The practical question is what remains after tax, debt, transaction costs, family equalisation, reinvestment decisions and risk.

If the announced CGT measures are enacted in their current form, owners considering a sale around the proposed transition dates may need to model:

  • what part of a gain sits before or after 1 July 2027;
  • whether existing small business CGT concessions apply;
  • whether a sale is a share sale, asset sale, staged sale or partial exit;
  • whether the relevant CGT event is tied to contract date, settlement date or another transaction step;
  • whether earn-outs, vendor finance, put/call options or rollover arrangements change the timing or tax profile;
  • whether valuation evidence is needed for long-held or pre-CGT assets.

This is where broad commentary becomes dangerous if it is treated as personal advice. A private capital example about higher effective tax rates may be directionally useful, but it will not tell a family business owner their own outcome.

The safe conclusion is not “sell now.”

The safe conclusion is: model the actual sale pathway before relying on the old walk-away number.

Discretionary trusts may need a fitness-for-purpose review

Discretionary trusts are common in Australian family groups. They may hold business interests, investment assets, property, retained wealth or assets intended to support the next generation.

The announced 30% minimum tax on discretionary trust taxable income does not mean “trusts are bad”. It does not mean every family group should restructure.

It does mean discretionary trusts may need a fitness-for-purpose review before a succession event or business sale.

The practical impact will depend on the trust deed, beneficiaries, marginal tax rates, corporate beneficiaries, unpaid present entitlements, Division 7A history, streaming arrangements, family trust elections, asset protection goals, estate planning and control objectives.

G+T puts the commercial concern sharply, saying discretionary trusts are “ubiquitous in Australian private capital and, more generally, in many family groups throughout Australia” and that “discretionary trusts and bucket companies face a reckoning.”

That is not a direction to restructure. It is a signal to review.

The rollover relief window announced in the Budget may become relevant for some groups, but rollover relief is not a reason to restructure by itself. Restructuring can create legal, tax, duty, control, asset protection and family consequences. It should only be considered if it makes sense commercially and after proper advice.

For succession purposes, the key questions are:

  • What assets are inside the trust?
  • Are the operating business, property, intellectual property and investment assets held in the right entities?
  • Are corporate beneficiaries or bucket company arrangements part of the structure?
  • Would the current structure slow due diligence or create buyer concern?
  • Does the structure still support the family’s control, income and estate planning goals?

A structure that worked for accumulation may not be the right structure for sale, transfer or reinvestment.

Buyers may care about structure more than owners expect

The Budget discussion should not stop at the seller’s tax bill.

Buyers care about risk. If a business has a messy ownership structure, unclear asset ownership, unresolved trust issues or a rushed restructure before sale, buyers may respond commercially.

That can show up as:

  • more due diligence questions;
  • slower transaction timelines;
  • tax warranties, indemnities or specific conditions;
  • pressure to complete a restructure before exchange or completion;
  • more conservative pricing;
  • reduced appetite for earn-outs, rollovers or management equity;
  • concern about whether the seller can deliver clean title to the assets or shares being sold.

This is where the Budget can become a deal-readiness issue.

If more owners test the market before proposed transition dates, buyers may also become more selective. Clean financials, clear ownership, low owner dependency and a well-prepared sale story may matter even more.

For owners considering a partial exit, management buyout, family transfer, earn-out or staged sale, the interaction between tax timing and commercial deal structure needs attention early. Waiting until a buyer is at the table may leave too little time to fix the structure calmly.

Negative gearing is a reinvestment issue, not the main succession issue

Negative gearing is not the centre of most family business succession plans.

But it may matter where established residential property is part of the owner’s post-sale reinvestment plan.

If a business owner sells and intends to move proceeds into property, shares, cash, superannuation, private credit, another business or family investment structures, each option needs to be compared after tax and after risk.

The proposed negative gearing changes may alter the relative appeal of established residential property for some owners. That does not make it the central issue. It simply forms part of the broader question:

If I sell the business, where can the capital sensibly go next?

Succession planning should answer that question before the sale, not after the money arrives.

A practical review for owners

A useful review does not start with panic. It starts with better questions.

1. Re-model the sale outcome

Ask your accountant to model sale scenarios before and after relevant transition dates. Include small business CGT concessions, asset ownership, structure, debt, transaction costs and likely timing of the CGT event.

2. Review the trust and entity structure

Map which entities own the business, property, intellectual property, retained cash and investment assets. Identify discretionary trusts, corporate beneficiaries, Division 7A or UPE issues, and any structure that may create sale friction.

3. Test whether waiting still pays

If the plan was to sell in three to five years, test whether the expected value uplift from waiting still outweighs tax, market, management, buyer and family risk.

Waiting may still be right. But it should be a decision, not inertia.

4. Check buyer readiness

Ask whether a buyer could understand and acquire the business cleanly. Look at financial presentation, contracts, customer concentration, key-person risk, ownership of assets and any family or trust arrangements that could slow a transaction.

5. Compare reinvestment alternatives

Do not compare business ownership against pre-tax alternatives. Compare it against after-tax, risk-adjusted options: property, listed equities, cash, debt reduction, superannuation, private investments, another operating business or family transfer.

6. Align the family conversation

The Budget may be the trigger, but the succession question is still personal. Are the children actually taking over? Does management want to buy in? Is the founder holding because the business is still the best use of capital, or because the decision has been deferred?

The succession point

The Budget does not tell every owner to sell. It does not tell every family group to restructure. It does not tell every trust to change.

It does something more useful: it creates a reason to test whether the old plan still works.

The question is no longer simply:

What is my business worth?

The better question is:

What do I keep, what risk do I avoid, and what can my capital do next?

For some owners, the answer will still be to hold. For others, it may be to prepare for sale, simplify a structure, revisit a family transfer, test buyer appetite, or start planning a staged exit earlier than expected.

The dangerous answer is not “hold” or “sell”.

The dangerous answer is assuming the old succession plan still works without re-running it under the announced Budget settings.

Doing nothing may still be the right decision.

But after this Budget, it should be a conscious decision — not a default inherited from the old rules.

Sources and further reading

Primary source:

Selected law firm and accounting commentary:

General information only — not financial, legal, or tax advice. Speak to a qualified professional before making decisions about your business sale.

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