PwC’s August Tax Briefing revisited major business tax measures announced in the 2026–27 Federal Budget and examined how rapid implementation is influencing business, investment, innovation, and transaction planning. Hosted by Patricia Muscat and James Wiley, the discussion featured Rohit Raghavan, Partner, Private Tax, Michelle Kassis, Partner, Reward Advisory, and Sam Sargood, Director specialising in the R&D tax incentive. A recurring theme was how Australia’s tax settings are shaping entrepreneurship, innovation, and risk-taking.
CGT reform accelerating valuation and transaction planning
The 50% CGT discount will be replaced by cost base indexation for gains accruing from 1 July 2027, together with a minimum 30% tax on capital gains for individuals. The reforms apply broadly across CGT assets, with specific continuing concessions proposed for eligible new residential and affordable housing.
Existing CGT benefits, including the exemption for pre-CGT assets and access to the CGT discount, will generally be preserved for gains accruing before 1 July 2027. However, taxpayers must establish transition date values on 1 July 2027 using a market valuation or an alternative method based on daily compounded growth or decline. The loss of the CGT discount may make asset sales a more acceptable alternative to share sales going forward.
Innovation settings producing mixed outcomes
Some founder shares and employee share schemes may be affected by the loss of the CGT discount. Listed employee share schemes should experience limited disruption, but startup and private company arrangements may require review. The proposed Innovative Business CGT Concession (yet to be legislated) would apply to shares issued while the business is less than ten years old, is an active business with turnover below $50 million, where the business satisfies an 80% active business test, and a five-year holding period, subject to a $10 million cap per individual. Its interaction with the employee share scheme startup concessions and legacy awards remains uncertain.
Expanded venture capital limits may support investment, although fund managers could face higher tax on carried interests.
Scope and impact of discretionary trust changes uncertain
Under measures yet to be enacted, from 1 July 2028, discretionary trusts will face a 30% minimum tax with a non-refundable tax offset available to some beneficiaries. As currently proposed, corporate beneficiaries will not have access to this tax offset, potentially resulting in an effective tax rate of up to 60% on income distributed to companies.
The definition of discretionary trust is a key uncertainty, with further clarity expected via the consultation process that has recently concluded. Whilst employee share trusts may be within scope of the minimum tax, most are already subject to tax at the highest marginal rate on undistributed income, so practically there should be no material impact, although a specific carveout would be welcome.
A three-year window from 1 July 2027 is proposed for rollover relief for those wishing to restructure away from a discretionary trust, but many aspects of the rollover design, as well as potential stamp duty impacts, are still uncertain.
R&D and cash flow measures requiring integrated decisions
Proposed R&D reforms from 1 July 2028 include a higher $50 million refundable-offset turnover threshold, a 4.5 percentage point increase in core offset rates, a reduced 1.5% intensity threshold for claimants of the non-refundable tax offset, and an increased $200 million expenditure cap. Refundability will generally be limited to companies less than ten years old, eligibility for supporting R&D expenditure will be removed, and the minimum expenditure threshold will rise to $50,000.
From 1 July 2026, eligible corporate taxpayers that are not significant global entities can offset current year tax losses against tax paid in the previous two years, subject to franking balances. Companies must consider future dividends, integrity rules, documentation, and R&D claims that may reduce available losses.
Overall, the reforms combine cash flow and innovation support, with significant changes to investment, ownership, and reward structures. With 1 July 2027 and 1 July 2028 looming as critical start dates, valuation, documentation, capital planning, and structural assessment will be central to preparing for implementation.
Access this Tax Briefing on demand via the video link below.
