Why growing businesses should be thinking about valuation, restructuring, goodwill, trading stock, and ownership structures well before 30 June 2027.
For many Australian business owners, the proposed tax measures announced as part of the 2026-27 Federal Budget have fundamentally changed the way business owners should think about long-term tax planning. In particular, the proposed removal of the general 50% Capital Gains Tax (CGT) discount from 1 July 2027, the introduction of a minimum 30% tax on capital gains, and the proposed minimum 30% tax regime for discretionary trusts have placed greater emphasis on business structure reviews, succession planning and the availability of the Small Business CGT Concessions. [budget.gov.au], [sbcgt.com.au], [blackwattl…tax.com.au]
Many business owners continue to focus primarily on reducing taxable income each year. However, for businesses experiencing rapid growth, the largest future tax liability may not arise from annual trading profits. It may arise from the eventual sale of goodwill that today has little or no value.
At Advivo, we frequently find that the greatest tax savings are achieved not through annual tax deductions, but through ensuring that ownership structures are fit for purpose before substantial business value is created. This aligns closely with our focus on business advisory, structuring, transition planning and long-term wealth creation strategies. [advivo.com.au]
If your business is growing strongly, future restructuring opportunities may become increasingly expensive as business value grows.
Why a Valuation Matters Before 30 June 2027
A business valuation helps answer critical questions:
- How much value currently exists?
- Where is that value sitting?
- Who owns future growth?
- Is the current structure still appropriate?
- What are the future succession and exit options?
- Will a future sale qualify for Small Business CGT Concessions?
Importantly, obtaining a valuation before a significant growth phase can establish evidence that goodwill was negligible at a particular point in time. This can become extremely valuable if restructuring discussions occur before substantial enterprise value is created.
Our Starting Assumptions
For this article, let’s assume the business currently has:
- Goodwill value of $0
- Positive trading history
- Increasing profitability
- Strong growth prospects
- Material levels of trading stock or inventory
- Potential enterprise value growth before 30 June 2027
This is a common scenario among growing businesses that may have historically been operated primarily for lifestyle or family income purposes but are now developing significant commercial value.
The fact that goodwill is currently assessed at nil may create a planning opportunity.
However, business owners should not assume that a restructure can occur tax-free simply because goodwill is currently worth nothing.
Understanding Goodwill and the Zero Cost Base Problem
One of the most misunderstood areas of business taxation is internally generated goodwill.
For many owner-operated businesses:
- No amount was paid to acquire goodwill.
- The goodwill was created through years of trading.
- The goodwill therefore has a cost base that is effectively nil.
This becomes important because any future sale of that goodwill may create a capital gain equal to most or all of the sale proceeds allocated to goodwill.
For example:
| Item | Value |
| Current Goodwill | $0 |
| Goodwill at Sale in 2030 | $3,000,000 |
| Cost Base | $0 |
| Capital Gain | $3,000,000 |
Historically, business owners could often rely upon the 50% CGT discount to reduce taxable gains.
The proposed Budget changes fundamentally alter that planning landscape.
The Significance of the 2026-27 Budget Changes
The Federal Budget announced several significant proposed reforms affecting capital gains and trust taxation from 1 July 2027 onwards.
1. Removal of the General 50% CGT Discount
The existing 50% CGT discount is proposed to be replaced by a cost-base indexation model from 1 July 2027. Future gains would therefore no longer automatically receive a 50% reduction simply because the asset was held for more than 12 months. [budget.gov.au], [superrecords.com.au], [sbcgt.com.au]
2. Minimum 30% Tax on Capital Gains
The Budget proposes a minimum 30% tax on net capital gains for individuals, trusts and partnerships from 1 July 2027. This limits planning opportunities that historically relied on accessing lower marginal tax rates. [budget.gov.au], [superrecords.com.au]
3. Minimum Tax on Discretionary Trusts
The Government has proposed a minimum 30% tax on discretionary trusts commencing from 1 July 2028, subject to various exceptions and transitional rules. Rollover relief has also been proposed to assist taxpayers who may wish to restructure. [budget.gov.au]
4. Retention of Small Business CGT Concessions
Importantly, the Government indicated that the Small Business CGT Concessions contained in Division 152 would remain available. For eligible business owners, these concessions may become significantly more valuable as other CGT concessions become less favourable. [blackwattl…tax.com.au], [sbcgt.com.au]
Key Factors That Will Influence a Future Valuation
Regardless of structure, a future valuation will generally focus on:
Sustainable Profitability
- Consistency of earnings
- Margin growth
- Recurring revenue
- Owner dependence
Customer Concentration
- Number of major customers
- Contract longevity
- Revenue diversification
Management Depth
- Ability to operate without the owner
- Succession planning
- Key management retention
Systems and Intellectual Property
- Proprietary processes
- Software
- Trademarks
- Brand value
Balance Sheet Strength
Valuers will closely examine:
- Trading stock
- Inventory turnover
- Debtors
- Cash flow management
- Working capital requirements
Exit Readiness
- Governance structures
- Financial reporting quality
- Scalability
- Risk management
Understanding Trading Stock During a Restructure
One of the most common misconceptions is that if goodwill is nil, a restructure can occur without tax consequences.
Unfortunately, trading stock can create tax exposure independently of goodwill.
Consider a business holding:
- $750,000 of inventory
- $300,000 of debtors
- $0 goodwill
Even if goodwill transfers at nil value, trading stock may be required to transfer at market value depending on the structure of the transaction and the availability of any rollover concessions.
This may trigger:
- Assessable income
- GST considerations
- Cash flow implications
- Working capital funding requirements
Therefore, any restructure should review not only goodwill but also:
- Trading stock
- Work-in-progress
- Plant and equipment
- Debtors
- Intellectual property
- Customer contracts
Don’t Forget State Government Duties
While much of the taxation discussion around business restructures focuses on Federal tax outcomes, Queensland business owners should also consider potential State Government duty implications when transferring business assets between entities.
Historically, Queensland duty rules have undergone significant changes and, while many business asset transfers may not attract duty in the same way they once did, certain transactions can still create duty consequences depending on the assets involved and the structure adopted.
Particular care should be taken where a restructure involves transferring:
- Queensland land or leasehold interests
- Business real property
- Interests in landholding entities
- Certain rights connected to Queensland property
- Business assets transferred as part of a broader arrangement involving dutiable property
Importantly, the availability of a Federal tax rollover does not automatically mean Queensland transfer duty relief is available.
A restructure may qualify for Federal tax concessions while still generating a State Government duty liability.
Accordingly, a restructure review should consider:
- Income tax consequences
- CGT consequences
- GST implications
- Transfer duty implications
- Financing and banking impacts
- Asset protection requirements
- Succession planning objectives
For businesses that own commercial premises, warehouses, industrial property or other land-related assets, Queensland duty modelling should be completed before any restructuring decision is implemented.
Scenario 1: Business Operating Through a Company
For businesses already operating through a company, one of the first questions should be:
Are the current shareholders the right people to own the next phase of business growth?
Common considerations include:
- Family succession
- Asset protection
- Sale preparation
- Intergenerational wealth transfer
- Future investor participation
Potential Restructure Opportunities
Possible strategies may include:
- Introducing a holding company
- Introducing family trusts
- Separating operating assets from investment assets
- Creating succession planning structures
The key issue is timing.
A restructure undertaken while goodwill is nil is often significantly easier than attempting the same restructure after substantial goodwill has been created.
The Impact of Losing the 50% CGT Discount
Historically, if goodwill grew from $0 to $3 million, a business owner selling qualifying shares may have expected relief through the general CGT discount.
Under the proposed changes, reliance on the 50% discount becomes far less viable because future gains would move to the new indexed cost base system. [budget.gov.au], [superrecords.com.au]
As a consequence, preserving eligibility for the Small Business CGT Concessions becomes even more important.
Why the Small Business CGT Concessions Matter More Than Ever
The four Division 152 concessions remain critical.
The 15-Year Exemption
Potentially eliminates the entire capital gain.
The 50% Active Asset Reduction
Reduces eligible gains by a further 50%.
The Retirement Exemption
Up to $500,000 per individual may be exempt.
The Small Business Rollover
Allows gains to be deferred into replacement business assets. [blackwattl…tax.com.au], [sbcgt.com.au]
For many business owners, these concessions will become the primary mechanism for reducing tax on a future sale.
What Happens to the Stock?
Where a company transfers its business operations to another entity, consideration needs to be given to:
- Trading stock
- Work in progress
- Debtors
- Plant and equipment
- Existing contracts
- Customer relationships
The stock generally cannot simply be moved without considering the tax consequences.
Questions that should be addressed include:
- What is the market value of the stock?
- Does a rollover provision apply?
- Is a Small Business Restructure Rollover available?
- Does GST apply?
- Does the receiving entity inherit the tax cost base?
State Duty Considerations
Where a company restructure involves transferring business assets to another entity, the review should extend beyond CGT and trading stock issues.
Particular consideration should be given to:
- Property ownership structures
- Commercial premises
- Related-party transfers
- Landholding entities
- Future succession arrangements
A restructure that appears tax-effective from a Federal perspective may still create Queensland transfer duty costs if not properly planned.
Key Questions for Company Structures
- Who owns future growth?
- Will Small Business CGT Concessions be available?
- Is succession planning completed?
- Is the company the ideal long-term owner?
- Should restructuring occur before significant goodwill is created?
- What are the trading stock implications?
- Are there any Queensland duty implications?
Scenario 2: Business Operating Through a Trust
Trusts have traditionally provided significant flexibility for:
- Income distribution
- Asset protection
- Family succession
- Estate planning
However, the Budget proposals have increased the need for trust owners to review existing structures.
The Proposed 30% Trust Tax
The proposed minimum 30% tax for discretionary trusts has led many business owners to reconsider whether existing trust structures remain optimal. [budget.gov.au]
For some businesses, this will prompt consideration of:
- Corporate structures
- Dual-entity structures
- Holding entities
- Family succession vehicles
- New ownership arrangements
The availability of proposed rollover relief may provide restructuring opportunities during the transition period. [budget.gov.au]
Goodwill Growth Inside a Trust
Where goodwill currently has a value of nil, future growth could create significant taxable value within the trust.
Many owners assume the trust structure itself solves this issue.
It does not.
The critical question becomes whether the trust and its beneficiaries will qualify for the Small Business CGT Concessions when a future sale occurs.
Trading Stock Considerations
Trust-owned businesses face the same stock issues as companies.
If stock is transferred to:
- Another trust
- A company
- A holding structure
- A new operating entity
then the tax consequences of the stock movement must be carefully reviewed.
A restructure that appears attractive from a goodwill perspective can still create taxable trading stock adjustments.
State Duty Considerations
Trust-based restructures often involve changes to ownership arrangements, trustees, beneficiaries or operating entities.
While these changes may be undertaken primarily for tax, succession or asset protection reasons, Queensland duty implications should also be reviewed.
Business owners should not assume:
- A trust restructure is automatically duty-free.
- A Federal rollover removes State Government obligations.
- Trust changes involving land or land-rich entities have no transfer duty consequences.
Where trusts hold commercial property, business premises, farmland or interests in landholding entities, a specific Queensland duty review should form part of the restructuring process.
The Increased Importance of Division 152
With:
The proposed removal of the 50% CGT discount,
The introduction of a minimum 30% tax on capital gains,
The proposed 30% trust tax,
the Small Business CGT Concessions become increasingly important planning tools. [budget.gov.au], [sbcgt.com.au], [blackwattl…tax.com.au]
For trust-owned businesses, ensuring future eligibility for those concessions may become more important than annual income tax planning.
Advivo’s Recommendations
For businesses expecting significant growth before 30 June 2027, we recommend:
- Obtain an independent valuation – Advivo can assist you with this.
- Determine whether goodwill is genuinely nil.
- Review trading stock, inventory and working capital values.
- Identify where future value is expected to emerge.
- Review existing ownership structures.
- Assess succession and wealth transfer objectives.
- Model future sale outcomes under the proposed CGT regime.
- Assess future eligibility for Small Business CGT Concessions.
- Consider whether a restructure should occur before significant goodwill develops.
- Review whether restructuring rollovers may be available.
- Evaluate the impact of the proposed 30% trust tax on long-term ownership structures.
- Quantify any Queensland transfer duty exposure before implementing a restructure.
- Ensure Federal tax, GST, duty and commercial outcomes are modelled together before making structural changes.
Final Thoughts
The proposed 2026-27 Budget changes are a reminder that business taxation is no longer simply about reducing this year’s tax bill.
For growing businesses with:
- Nil current goodwill,
- Significant stock holdings,
- Increasing profitability,
- Ambitious growth plans,
- Potential future sale opportunities,
the critical question is no longer:
“How can I save tax this year?”
Instead, it is:
“Who should own the future goodwill before it becomes valuable?”
With the proposed loss of the general 50% CGT discount, the introduction of a minimum 30% tax on capital gains, the proposed 30% minimum tax on discretionary trusts, and the potential for Queensland transfer duty costs during a restructure, the period before 30 June 2027 may represent one of the most important strategic planning windows many business owners will encounter. Early valuation, proactive restructuring, careful management of trading stock transfers, and preservation of Small Business CGT Concession eligibility could ultimately produce significantly greater tax savings than any deduction claimed in the current financial year. [budget.gov.au], [sbcgt.com.au], [blackwattl…tax.com.au]
Disclaimer: This article contains general information only and is based on proposed Budget measures that may be amended before becoming law. Business owners should obtain professional taxation, legal and commercial advice before implementing any restructuring strategy or relying on Small Business CGT Concessions.
