Think your company structure means the general 50% CGT discount doesn’t apply to you? Think again.
One of the biggest misconceptions among business owners is that because their business operates through a company, the significant CGT changes taking effect from 1 July 2027 have little relevance to them.
But there’s an important distinction: a company selling its business assets is not the same as you personally selling your shares in that company.
Companies generally cannot access the general 50% CGT discount. However, eligible individual shareholders may be able to access the discount on qualifying gains, including eligible gains accrued before 1 July 2027, subject to the applicable rules.
That distinction could matter when you eventually exit your business - even if you have no plans to sell before July 2027.
At Yield Advisory, we believe business owners should understand what their business is worth today, identify opportunities to build genuine value, and plan for the transition date.
Here’s why a valuation could be more important than you think.
Your company structure doesn’t tell the whole story
Let’s say you own a successful business through a company. You’ve built a strong reputation, loyal customers, reliable earnings and a capable team.
The company owns and operates the business. You own the shares in the company.
When you eventually sell, a buyer might purchase the business assets from the company. Alternatively, they might purchase your shares in the company.
These are different transactions, with potentially different tax outcomes.
If the company sells its business assets, the company’s tax position needs to be assessed. It generally cannot claim the individual general 50% CGT discount, although separate small-business CGT concessions may be available if the relevant requirements are met.
If you sell shares that you personally own, the capital gain arises at the shareholder level. Depending on your circumstances, the shares you own and the relevant rules, the general 50% CGT discount may be available for eligible gains accrued before 1 July 2027.
A share sale isn’t always possible or preferable. Buyers will consider the company’s liabilities, tax history, contracts and other risks. But assuming that your company structure automatically rules out any relevance of the CGT changes could mean overlooking an important planning consideration.
Why 1 July 2027 matters - even if you sell later
The significant CGT changes taking effect from 1 July 2027 replace the general 50% CGT discount with an inflation-based cost-base adjustment for relevant gains accruing from that date. A minimum 30% tax rate will also apply to certain individual net capital gains.
The important planning point is the transition date, not simply the date you sell.
Under the transitional arrangements, eligible gains accrued before 1 July 2027 can retain their existing treatment, even where the asset is sold later. The rules provide for the pre- and post-transition components of a gain to be determined using an applicable method, which may involve market value at the transition date or an alternative prescribed apportionment method.
For eligible individual shareholders, the value of their shares around 30 June 2027 may therefore be important. But the relevant asset needs to be valued: the value of the underlying business is not necessarily the same as the value of the shares.
This is where a valuation can play an important role in informed planning.
Why establish your business’s value now?
Imagine your business is worth $3 million today.
You engage Yield Advisory to establish a baseline valuation and identify opportunities to improve profitability, strengthen systems, reduce reliance on you as the owner and make the business more attractive to a future buyer.
Over the next 12 months, you implement those improvements. By 30 June 2027, the business may have increased in value to $3.8 million.
That increase would represent genuine progress in building a stronger business, subject to market conditions and the assumptions underpinning the valuations.
But there are two important considerations.
First, a business valuation today gives you a baseline. It helps identify where value is being created and gives you a reference point against which to measure progress.
Second, appropriate valuation evidence around the transition date may help establish the relevant market value for eligible shares or other assets under the transitional rules. A valuation of the business itself may be an important input, but it is not automatically a substitute for valuing the shares. Debt, surplus cash and other assets or liabilities can affect share value.
A valuation completed today does not automatically replace the valuation evidence that may be required around the transition date.
The objective is not to put a higher number on a report. It is to build real commercial value, support that value with appropriate evidence and understand the potential tax implications before making decisions.
Building value now could make a difference later
Why focus on increasing your business’s value before 1 July 2027?
Because a stronger business can create more options for you - whether you plan to sell, bring in a partner, pass the business to the next generation or simply improve its long-term performance.
Where the transitional rules apply, a higher supportable market value for eligible shares at the transition date of 1 July 2027 may mean a greater portion of a later gain is attributable to the pre-transition period. That could affect the eventual tax outcome.
It is not a guarantee of a lower tax bill. The outcome depends on the asset being sold, its cost base and value, your ownership structure, eligibility for relevant concessions, the eventual sale price and the applicable rules.
That is why the opportunity is broader than tax alone. Building a more profitable, resilient and sale-ready business can improve your commercial position while helping you plan for the tax consequences of a future exit.
At Yield, we want to use your baseline valuation as the starting point for a focused business improvement plan.
Depending on your business and goals, that may include:
The earlier we establish your starting position, the more time we have to make meaningful improvements.
What should business owners do now?
1. Establish a baseline valuation.
Understand what your business is worth today. Where relevant, consider both the value of the underlying business and the value of the shares you personally own.
2. Review your ownership structure and exit options.
Understand who owns the business assets and shares, whether an asset sale or share sale could be realistic, and what tax implications may arise under each option.
3. Build genuine business value.
Work with us to identify and improve the key drivers of value over the coming months. The aim is to build a stronger business while understanding how that growth may affect your future plans.
4. Plan for the transition date.
Discuss with your yield adviser what valuation evidence may be required around 30 June 2027, taking into account the asset being valued and the applicable transitional rules.
5. Develop a tax-aware exit strategy.
When the time comes to sell, assess potential transaction structures and available concessions with your accountant and adviser, alongside your commercial and personal objectives.
Don’t assume the CGT changes are irrelevant to you
You don’t need to be planning a sale in 2027 to benefit from understanding your business’s value.
And you shouldn’t assume that operating through a company means there is nothing to consider.
The important questions are what you own, what you may ultimately sell, how a transaction could be structured and how the transitional rules apply to your circumstances.
At Yield Advisory, our message is simple: value your business now, build its value deliberately, and plan ahead.
A baseline valuation today can help you understand where you stand. Strategic advisory work can help you build genuine value. And appropriate valuation evidence around the transition date can help support informed decisions about your future tax position.
Let’s make the time before 1 July 2027 count.
Speak with us about a baseline business valuation and a tailored advisory plan to help you build value and prepare for the future.
This article provides general information only and is not tax, legal or financial advice. The application of the CGT changes depends on individual circumstances, ownership structures, eligibility and the legislation in force. Obtain advice specific to your circumstances before making decisions.