The 1 July 2027 CGT Reset: What It Means for Your Business

Part one covered what the 1 July 2027 CGT reset means for your investment property. This is part two: the business you own. The date is the same, and so is the good news underneath it: no business has to get a valuation done on 1 July 2027, and plenty won't need one at all.

What the reset does to a business depends on what you own and which entity owns it. A company, its shares, a sole trader's goodwill and a factory bought in 1979 can each get a different answer, and the concessions most owners plan their retirement around are not all protected yet.

Prefer to listen? We covered this in The Line in the Sand, Part Two: Your Business and the 1 July 2027 Reset, episode 63 of the Aevum Accounting Podcast.

Who the reset reaches in a business

A company's own assets mostly aren't reset. The reset protects the 50% discount on growth you have already had, and a company never had that discount, so its post-CGT assets, goodwill included, are left alone. The shares in it are different. If you hold them personally or in a family trust, they are reset, and so are listed shares, where the closing price on 30 June 2027 will be on the public record. Without a company, the reset reaches the business's assets directly: a sole trader's or family trust's goodwill and premises, and each partner's share of a partnership's assets, unless that partner is a company. Trading stock and equipment keep their own tax rules.

One business, two answers

Most family businesses are a mix. A common setup has a trading company running the business, with the premises held in a family trust or in the parents' names. The premises get reset. The company's goodwill generally doesn't. If the owners later sell their shares rather than the company selling the business, those shares carry a 1 July 2027 value underneath them, even though nothing inside the company changed. Before you plan a sale, it is worth knowing which entity holds each asset, because that decides whether the reset touches it at all.

Why the draft formula struggles with a business

Market value is the only route today. The formula Treasury released in August is still not registered at the time of writing, so nobody can use it yet. Even once it is, it draws a smooth compounding curve, and business value moves in steps: a big contract won, a key client lost, a competitor bought out. Goodwill built from almost nothing is the hardest case. Start with $1,000, sell for $2 million five years after the reset, and the draft would put about 78% of the growth after the line, even though 80% of the time was before it. As drafted, it also divides by what you paid, so it cannot handle goodwill that cost nothing at all. The choice is made in the year you sell, so keep the evidence from 2027.

The biggest number: assets held since before 1985

Pre-CGT assets lose their status. Capital gains tax started on 20 September 1985, and a gain on an asset held since before then is generally ignored today. On 1 July 2027 that ends in every entity, companies included: the asset is treated as sold at market value and bought back, so growth up to the line stays tax-free and growth after it is taxable. Take a couple who bought their factory in their own names in 1979. If it is worth $4 million at the reset and they sell it in 2035 for $6 million, the first $4 million stays tax-free, but $2 million of growth that was never going to be taxed is now in the system, before indexation and any concessions. Buildings put up or major improvements made since 1985 were already taxable, and something inherited from a person who died on or after 20 September 1985 is usually not pre-CGT in your hands anyway.

Get the pre-1985 value done properly

This is the one case for a proper valuation. Every dollar the 1 July 2027 value is understated by becomes a dollar of taxable gain when you sell, so this is not one to leave to a formula. The timing works the same way as for property: a valuer can work after the date, using comparable sales and the condition of the place on the day, and for a trading business the accounts to 30 June 2027, which won't exist until after it anyway. Just don't leave it for years. If the old asset is shares in a company or an interest in a trust, a separate rule called CGT event K6 can apply depending on what the entity owns, and that needs a look at the actual holding.

The small business concessions and the 15-year gap

Three of the four are protected. When you test whether you qualify for the 50% active asset reduction, the retirement exemption (capped at $500,000 over your lifetime) or the small business rollover, the law has you ignore the 2027 deemed sale and look at your whole period of ownership. The 15-year exemption, which has no cap and can wipe out the whole gain if you are 55 or over and retiring, is not on that list. Treasury's own material says that without a further change it might not apply. The fix is in a bill the government put into Parliament on 14 October 2026, applying from 2027-28, and it is not law yet. It also doesn't cover pre-1985 assets: on the Act's wording, their 15-year and active asset clocks may start again on 1 July 2027. The concessions themselves are explained in our guide to selling your business.

Some good news, and a warning on restructures

The concessions matter more now. Episode 37 covered stacking the concessions on top of the 50% general discount. For growth after the reset that bottom layer is gone, so the concessions do more of the work. From 2027-28 the 50% active asset reduction opens to businesses with aggregated turnover under $10 million, up from $2 million, and that change is already law. The 30% minimum is worked out after the concessions, so whatever they take off, it never sees. The warning is restructuring. The government's own explanatory material says some rollovers after the reset could trigger the gain the reset has been holding over, and the fix has been left for a later bill. Don't restructure on the strength of a promise.

If you own a business and want someone to work out which of these applies to you, book a consultation with our team. Our small business accountants in Perth can go through what you own and who owns it. If you are already a client with a business, bring it to your next catch-up.

The information in this article is general in nature and does not take into account your personal circumstances. It does not constitute specific tax or financial advice. Everyone's situation is different, so we recommend speaking with a qualified professional at Aevum Accounting before acting on anything you have read here.