Estate planning, business succession and M&A: legal considerations following the 2026–27 Federal Budget

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Monday, 24 Aug 2026

Executive summary 

The 2026–27 Federal Budget tax package may affect when and how business owners sell, restructure or transfer their businesses. 

The key developments are: 

• enacted reforms replacing the existing 50% capital gains tax (CGT) discount for individuals and trusts with cost-base indexation and a minimum 30% tax on relevant real capital gains accruing from 1 July 2027; 
• retention of the four small-business CGT concessions, with the turnover threshold for the 50% active asset reduction increased from $2 million to $10 million; 
• a proposed 30% minimum tax on discretionary trust income from 1 July 2028; 
• a proposed exemption for discretionary testamentary trusts established for genuine testamentary purposes; and 
• proposed rollover relief for three years from 1 July 2027 for eligible restructures out of discretionary trusts. 

These measures do not determine the appropriate legal structure for a business sale or succession. Before acting, owners should consider how the reforms interact with their transaction documents, ownership arrangements, trust deeds, governance framework and estate plan. 

This article reflects the position as at 1 August 2026. The CGT reforms have been enacted. The minimum tax on discretionary trusts and expanded rollover relief remain proposed and subject to legislation following consultation. 

Timing a business sale under the new CGT regime 

From 1 July 2027, the 50% CGT discount for individuals and trusts will be replaced by cost-base indexation and a minimum 30% tax on relevant capital gains after indexation. 

The reforms generally apply to gains accruing from 1 July 2027. Transitional rules preserve the existing treatment of gains accrued before that date. 

The four small-business CGT concessions have also been retained. The aggregated turnover threshold for the 50% active asset reduction has increased from $2 million to $10 million. This change applies specifically to that concession and does not remove the separate eligibility requirements for the other small-business concessions. 

Business owners contemplating a sale around 1 July 2027 should obtain advice before entering a binding agreement. For an ordinary disposal under a contract, CGT event A1 generally occurs when the contract is entered into, rather than at completion. 

This makes the drafting of term sheets, heads of agreement and sale agreements important. Whether a preliminary document is binding depends on its terms and the parties’ conduct. An attempt to record only an in-principle commercial understanding may have unintended consequences if the document creates an immediately enforceable obligation to sell. 

The ATO’s guidance on CGT events confirms the general contract-date rule. 

Tax should not, however, be the sole driver of the transaction timetable. Accelerating a sale may leave insufficient time to prepare for due diligence, obtain third-party consents, remedy corporate or trust-record deficiencies and negotiate appropriate contractual protections. 

Choosing the appropriate transaction structure 

The reforms may affect the financial comparison between an asset sale and a sale of shares or units, but the legal differences remain significant. 

In an asset sale, the purchaser acquires specified business assets and assumes the liabilities identified in the agreement. Contracts, employees, leases, licences and registrations may need to be transferred individually, often with third-party consent. 

In a share or unit sale, the purchaser acquires an interest in the entity or trust carrying on the business. The underlying assets and contracts generally remain in place, but the purchaser acquires indirect exposure to the entity’s historical liabilities. 

The structure will affect: 

• the identity of the seller and the assets transferred; 
• the scope of legal and financial due diligence; 
• the consents and regulatory approvals required; 
• responsibility for employee entitlements; 
• the warranties, indemnities and liability limitations required; 
• the treatment of purchase price adjustments; 
• the seller’s continuing exposure after completion; and 
• the ability to extract or distribute the sale proceeds. 

A structure that produces a favourable tax outcome for the seller may not be acceptable to the purchaser. The preferred approach must reflect the parties’ commercial objectives and allocation of transaction risk. 

Reviewing discretionary trust arrangements 

The Government proposes a minimum 30% tax on the taxable income of discretionary trusts from 1 July 2028. The measure is not yet law. 

The proposal may cause some business owners to consider moving their business or investments into a company or fixed trust. Before doing so, the legal purpose and operation of the existing trust should be reviewed. 

Relevant considerations include: 

• who controls the trust; 
• who may appoint and remove the trustee; 
• how those roles pass on death or incapacity; 
• whether the deed permits the proposed restructure; 
• the scope of the beneficiary class; 
• the assets, shares or investments held by the trust; 
• existing loans, guarantees and security interests; 
• unpaid present entitlements and related-party arrangements; 
• restrictions in finance documents, leases and other contracts; and 
• the trust’s asset-protection and succession functions. 

A discretionary trust may continue to provide important legal benefits even if its comparative tax treatment becomes less favourable. Conversely, an older trust deed may no longer reflect the family’s current ownership, governance or succession objectives. 

The appropriate response is therefore a review of the complete structure, rather than an automatic decision to retain or replace the trust. The ATO currently identifies the proposed minimum tax as not yet law. 

Testamentary trusts and succession to business interests 

Following the original Budget announcement, the Government confirmed in June 2026 that it intends to exempt income from all types of discretionary testamentary trusts from the proposed minimum tax, provided they are established for genuine testamentary purposes. 

The proposed exemption will be limited to income from assets of the deceased estate. For discretionary testamentary trusts established on or after 1 July 2028, the exemption is also intended to apply only where the trust can benefit individuals and income-tax-exempt entities. 

The final definition and integrity rules remain subject to legislation. The updated position is set out in the Government’s June 2026 implementation announcement. 

Testamentary trusts may continue to assist with: 

• protecting inherited business interests and family wealth; 
• managing inheritances for children or vulnerable beneficiaries; 
• responding to beneficiaries’ different circumstances; 
• managing family law, creditor and bankruptcy risks, subject to the circumstances; 
• preserving assets for future generations; and 
• establishing a framework for control of inherited business interests. 

However, a Will alone will not determine succession to every business asset. 

Company assets remain the property of the company. Trust assets remain governed by the trust deed and the trustee’s powers. Shares and units may be subject to transfer, call option or valuation provisions in a shareholders or unitholders agreement. Superannuation benefits are governed separately by the fund rules and any effective death-benefit nomination. 

A business owner’s estate plan should therefore be coordinated with: 

• company constitutions; 
• trust deeds and succession of control provisions; 
• shareholders, unitholders and partnership agreements; 
• buy-sell arrangements and insurance; 
• loan, security and guarantee arrangements; 
• enduring powers of attorney; and 
• superannuation death-benefit nominations. 

Together, these documents should address who receives the economic value of the business, who assumes legal control and how the business will continue following death or incapacity. 

The proposed three-year restructuring window 

The Government proposes expanded rollover relief for three years from 1 July 2027 to assist eligible taxpayers restructuring out of discretionary trusts into structures such as companies or fixed trusts. 

The detailed eligibility conditions and integrity rules have not been legislated. Consultation on implementation closed on 31 July 2026. 

Even if a restructure qualifies for income tax and CGT relief, implementation may require: 

• transferring business assets and intellectual property; 
• assigning or novating material contracts; 
• obtaining landlord, financier, franchisor or regulatory consent; 
• transferring employees, licences and registrations; 
• releasing or replacing guarantees and security interests; 
• establishing a new company or trust; 
• issuing shares or units and adopting new governance arrangements; 
• documenting related-party balances; and 
• addressing GST and State or Territory duty. 

Commonwealth rollover relief should not be assumed to remove State taxes, third-party consent requirements or all future tax consequences. 

A restructure should also be consistent with the owner’s longer-term plans. Moving a business into a new entity shortly before a sale may complicate due diligence, disrupt contractual relationships or produce a structure that a purchaser does not wish to acquire. 

Practical implications for business owners 

The Budget measures provide an opportunity for owners to review whether their legal arrangements remain suitable. 

That review should address: 

1. Ownership: Which entities own the business, intellectual property, premises and investments? 
2. Control: Who controls each company or trust, and what happens following death or incapacity? 
3. Transfer restrictions: Do existing agreements restrict or require the transfer of shares, units or partnership interests? 
4. Transaction structure: Is the current structure suitable for an asset sale, equity sale, family transfer or management buyout? 
5. Valuation and funding: How will an ownership interest be valued and funded on retirement, death or incapacity? 
6. Governance: Who may appoint directors or trustees and approve important decisions? 
7. Succession: Will management, control and economic ownership pass to the same person or to different people? 
8. Implementation: Which consents, transfers and new documents would be required for a restructure? 

Addressing these matters before a sale or succession event provides greater flexibility and reduces the risk of inconsistencies between the business documents and estate plan. 

How Avant Law can assist 

Avant Law can assist business owners to review their ownership structures, prepare for a sale or succession event, implement a restructure and ensure their business and estate-planning documents work together. 

Where tax, accounting or financial advice is required, Avant Law can work with the business owner’s existing professional advisers so that the legal structure and documentation are consistent with that advice. 

If you have any questions, or would like more information about how we can assist you before you sign the contract, please call 1800 867 113, or to organise a confidential discussion at a time that suits you, please click here.

Conclusion 

The Budget measures may change the tax environment in which a sale, restructure or succession occurs, but they do not determine the appropriate legal structure. 

Before taking action, business owners should ensure that their transaction documents, trust arrangements, governance framework and estate plan operate together. 

Early legal advice, coordinated with the owner’s other professional advisers where required, can preserve available options and reduce the risk of implementing a tax-driven change that is inconsistent with the proposed transaction, succession plan or long-term protection of business and family wealth.