Estate planners and wealth advisers across Australia have started using a different name for the new Capital Gains Tax changes.
Death taxes.
It is a blunt label. But once you understand what is actually being proposed, particularly for family businesses and trust holders, it is not a difficult one to understand.
The issue with trusts.
Many Australian business owners, particularly those running family businesses, have structured their affairs through discretionary trusts. This was sensible planning. A trust offered flexibility in how income and gains were distributed, helped manage tax, supported succession from one generation to the next, and provided a layer of asset protection. Trusts have been at the centre of good financial structuring in this country for a long time.
The 2026 Federal Budget changes that model in two significant ways.
First, from 1 July 2027, the 50% Capital Gains Tax discount that has existed since 1999 will be removed for most assets. When a business held through a trust is sold, the capital gain flows into the trust. Under the current rules, that gain received a 50% discount before being taxed in the hands of beneficiaries. Under the new rules, that discount is gone.
In its place:
inflation-based indexation and a minimum 30% tax rate on the gain.
Second, from 1 July 2028, discretionary trusts will be subject to a 30% minimum tax on their taxable income, regardless of how distributions are made to beneficiaries.
For a family business owner who has spent twenty or thirty years building something, with the intention of either selling it to fund retirement or passing it to the next generation, these changes materially alter the financial outcome.
This “death taxes” label comes from our new reality. If the Labor Government wasnt planning for death taxes, this unique set of discretionary powers would not be in the proposed tax act.
There is little you can do about it.
The transitional provisions in these changes include one small protection. Any gain your business built before 1 July 2027 can still be assessed under the old rules, including the 50% discount, regardless of when you sell. But to use that protection, you need to be able to establish what the business was worth at that date.
A formal, independent business valuation, prepared as at 1 July 2027, creates that reference point. It documents the value of what you built under the rules that existed when you built it. It gives you and your accountant an informed position from which to apply the transitional provisions correctly.
For business owners with trust structures in particular, the time to get this right is before the deadline arrives, not after it. And for those actively considering a sale, it is worth knowing that selling before 1 July 2027 means the new rules do not apply to your transaction at all.
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The CGT and trust changes described in this article have been announced as part of the 2026 Federal Budget and are subject to legislation passing Parliament. Individual circumstances vary — seek specific advice from a registered tax adviser.
