For decades, assets acquired before 20 September 1985 have remained outside Australia’s capital gains tax (CGT) regime. Commonly referred to as pre-CGT assets, these holdings have included family business shares, commercial property, and long-term investment assets accumulated before the introduction of CGT.
The 2026 Federal Budget introduces proposed reforms that may significantly change how certain pre-CGT assets are treated, particularly where they are held through discretionary trusts or complex business structures. If implemented, these changes could create taxable events on assets that have historically remained exempt from CGT, potentially affecting succession planning, business restructuring, and long-term wealth strategies for many Australian business owners.
What are Pre-CGT Assets, and Why Did They Matter?
Pre-CGT assets are assets acquired before 20 September 1985, prior to the introduction of Australia’s capital gains tax system. These assets have historically remained exempt from CGT, creating long-term tax advantages for many business owners and investors. Businesses holding these assets often rely on structured compliance and tax outsourcing services to manage reporting and ongoing tax obligations.
The Original CGT Framework
What Counted as a Pre-CGT Asset
- Shares acquired before 20 September 1985
- Commercial or residential property purchased before CGT commenced
- Business goodwill and intellectual property created before 1985
- Long-held farming and rural properties
- Interests in older trusts and partnerships
The Scale of Pre-CGT Wealth in Australia
What the 2026 Budget Changed, and What It Did Not
The Core Reform
- The deemed disposal may create a taxable capital gain despite the asset not being sold.
- That gain may then fall within the revised CGT framework, replacing the traditional 50% CGT discount with a 30% minimum effective tax rate from 1 July 2027.
What the Budget Did NOT Change
It is equally important to understand what remains unchanged under the current Budget measures:
- Pre-CGT assets held personally by individuals generally retain their CGT-exempt status on direct disposal
- The main residence exemption for an individual’s primary home remains unchanged
- Small business CGT concessions, including the 15-year exemption, retirement exemption, rollover relief, and active asset reduction, continue to apply where eligibility requirements are met
- Pre-CGT assets held within companies are subject to a more complex position, with different treatment potentially applying compared with assets held through discretionary trusts
How Pre-CGT Asset Treatment Compares: Before and After
Asset & Structure | Before the 2026 Reforms | From 1 July 2027 | Recommended Action |
Pre-1985 asset held personally | Generally CGT exempt | No material change is currently proposed | Review ownership structure |
Pre-1985 asset held in a discretionary trust | Generally CGT exempt | Potential deemed disposal and taxation under revised CGT rules | Urgent review recommended |
Pre-1985 shares in a private company held through a trust | Generally CGT exempt | May fall within the new trust reform rules | Seek specialist tax advice |
Pre-1985 commercial property held in a trust | Generally CGT exempt | Potential deemed disposal based on market value | Obtain updated valuations |
Pre-1985 business asset held in a company | Generally CGT exempt | Treatment under revised CGT rules remains uncertain | Review with tax adviser |
Pre-1985 farming land held by a family trust | Generally CGT exempt | Potential deemed disposal from 1 July 2027 | Review succession and trust structure |
Who Is Most Exposed to These Changes
The impact of the proposed reforms depends largely on where pre-CGT assets are held and the type of structure involved.
Family Businesses Operating Through Discretionary Trusts
Businesses established before 1985 that hold land, goodwill, or operating assets within discretionary trusts are likely to face the greatest exposure. Under the proposed rules, certain trust-held pre-CGT assets may trigger a deemed disposal event from 1 July 2027, potentially creating substantial taxable gains.
Farming and Agricultural Families
Many farming families have historically held rural land through discretionary trusts for asset protection and succession planning purposes. Significant increases in land values over several decades may result in considerable tax exposure if the new rules apply to those trust-held assets.
Long-Established Professional Practices
Medical, legal, accounting, and financial planning practices with pre-CGT goodwill or business interests held through trusts may also be affected. Early valuation and tax modelling will become increasingly important ahead of the proposed commencement date.
Business Succession and Estate Planning
Many succession strategies have relied on the long-standing CGT treatment of pre-CGT assets. Where those assets are held within trusts, existing estate and succession plans may now require review under the revised framework.
The Cost Base Problem, and Why Records Matter More Than Ever
Establishing Cost Base for Pre-CGT Assets
Under the proposed reforms, affected pre-CGT assets may require a market valuation as at 1 July 2027 to establish a new cost base for future CGT calculations.
For many assets acquired decades ago, original purchase records may be incomplete or unavailable, making valuation and documentation increasingly important.
What Business Owners Need to Document
- Identify assets acquired before 20 September 1985
- Confirm whether each asset is held personally, through a company, or within a trust
- Locate purchase contracts, settlement statements, and historical valuations
- Obtain updated independent valuations where records are incomplete
- Secure formal property or business valuations where required
- Store all documentation in an organised and accessible format
Strong documentation and record management will be critical under the revised rules. Our outsourced bookkeeping services help businesses maintain accurate financial records, asset documentation, and audit-ready reporting systems.
Understanding Your Tax Rate Exposure on Pre-CGT Gains
The proposed deemed disposal rules may create substantial taxable gains for long-held assets that have appreciated significantly over several decades.
Asset | Original Cost | Estimated 2027 Value | Indicative Tax Exposure* |
Commercial property (trust) | $120,000 | $2.4 million | ~$684,000 |
Farm land (trust) | $80,000 | $1.8 million | ~$516,000 |
Business goodwill (trust) | $0 | $600,000 | ~$180,000 |
Private company shares (trust) | $50,000 | $900,000 | ~$255,000 |
*Illustrative examples only based on a 30% effective tax rate. Actual outcomes depend on asset type, ownership structure, available concessions, and overall taxable income.
Understanding how capital gains interact with your broader tax position is critical before making restructuring decisions. Our guide to Australian income tax scales and marginal rates provides additional context on how tax rates apply across different income levels.
Can Small Business CGT Concessions Help?
Yes. The small business CGT concessions remain available under the 2026 Budget and may significantly reduce the tax impact of eligible pre-CGT deemed disposal events.
Concession | Benefit | Key Requirement |
15-Year Exemption | The entire capital gain may be disregarded | Asset held for 15+ years, and the owner is retiring or permanently incapacitated |
50% Active Asset Reduction | Reduces the capital gain by 50% | Asset must qualify as an active business asset |
Retirement Exemption | Up to $500,000 lifetime CGT exemption | Eligibility requirements and contribution rules may apply |
Rollover Concession | Defers the capital gain | Replacement asset or capital improvement required within the relevant period |
What Business Owners Should Do Right Now
Given the complexity of the proposed reforms, tailored services for business owners can provide valuable guidance when reviewing trust structures, succession plans, and future tax obligations.
Immediate Actions (Do These Now)
- Identify all assets within your business structure and flag any potentially acquired before 20 September 1985
- Confirm which entity holds each pre-CGT asset, as exposure depends on ownership structure
- Engage a registered tax adviser to assess whether deemed disposal rules may apply
- Obtain independent market valuations for key assets, including property, goodwill, and equity interests
- Review eligibility for small business CGT concessions and model potential outcomes
Immediate Actions (Do These Now)
- Assess whether the 2027–2030 rollover relief window may support restructuring options
- Compare outcomes across companies, unit trusts, or personal ownership structures
- Update succession plans where pre-CGT assumptions were previously relied upon
- Model eligibility for retirement-based CGT concessions where relevant
- Ensure financial records and bookkeeping systems are complete and valuation-ready
Immediate Actions (Do These Now)
- Monitor final ATO guidance as administrative detail is released
- Review CGT implications as part of FY2027 income tax planning. Retain valuation reports and supporting documentation for audit readiness
Accurate record-keeping and correct reporting will be essential when lodging returns involving CGT events arising from these reforms. Our guide on how to lodge a tax return in Australia provides a clear overview of key steps, deadlines, and requirements for both self-lodgement and agent-assisted returns.
Common Mistakes to Avoid
- Assuming all pre-CGT assets remain exempt without checking whether they are held in a trust structure affected by the 2026 Budget changes
- Delaying valuations until closer to 2027, when valuation demand and turnaround times are likely to increase significantly
- Treating the rollover relief window as automatic, rather than a structured and formally executed process
- Overlooking the availability and interaction of small business CGT concessions, which may materially reduce tax outcomes
- Failing to update succession and estate plans that rely on historic pre-CGT treatment
- Delaying action despite holding fiduciary responsibility as a trustee or company director for affected assets
The Bottom Line
Pre-CGT assets have long been exempt from capital gains tax and remain so for assets held personally under the 2026 Budget framework. However, where these assets are held within discretionary trusts, the proposed changes from 1 July 2027 may create new tax exposure.
Given the time required for valuations, restructuring, and legal implementation, early review is essential. Befree can assist business owners and trustees in assessing their position and planning ahead.
Frequently Asked Questions
I acquired my business property in 1978 and have owned it personally ever since. Am I affected?
Personally held pre-CGT assets are not currently subject to the deemed disposal rules applying to trust-held assets. However, if the asset has ever been transferred into a trust or company structure, it should be reviewed, as tax treatment may differ.
What exactly is a ‘deemed disposal’? Does the ATO actually tax me on a sale that hasn’t happened?
Yes. A deemed disposal treats an asset as if it were sold at market value on a specific date, even if no sale occurs. Any resulting capital gain is taxed under normal CGT rules, creating a liability without cash proceeds, which makes advance planning important.
Can I transfer my pre-CGT assets out of my trust before 1 July 2027 to avoid the deemed disposal?
Not necessarily. Transferring assets before the effective date may itself trigger CGT or stamp duty depending on structure and jurisdiction. Any restructuring should be carefully modelled with tax and legal advice before action is taken.
Are pre-CGT assets in a Self-Managed Super Fund (SMSF) affected?
SMSF-held assets are generally not within discretionary trust structures, so they are typically not targeted by these specific trust-based measures. However, broader CGT changes may still apply, so adviser review is recommended.