Australia’s 50% CGT discount is being abolished from 1 July 2027 under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which passed Parliament on 26 June 2026. The value of your private company shares, business interests or intellectual property at 1 July 2027 will permanently determine how much of your eventual capital gain is taxed under the old rules and how much falls under the new regime. Sherwood Australia provides the independent, AFSL-licensed valuations that lock in that number.
The Bottom Line
This is no longer a proposal. The legislation is enacted and applies from 1 July 2027. Every business owner, trustee or IP holder with an unlisted asset needs a defensible market valuation at that date. An independent valuation from Sherwood Australia is the most accurate and defensible way to establish it.
What changes on 1 July 2027?
From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is removed and replaced with two mechanisms:
1. Cost base indexation. The asset’s cost base is uplifted in line with CPI from acquisition (or from 1 July 2027 for pre-existing assets) to disposal. Tax applies only to the real, inflation-adjusted gain.
2. A 30% minimum tax rate. After indexation, the tax rate on the net capital gain cannot fall below 30%. A taxpayer on a 16% marginal rate still pays 30% on the gain.
The net effect: the old system taxed half the nominal gain at your marginal rate. The new system taxes the full inflation-adjusted gain, with a 30% floor.
Is the legislation confirmed?
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 was enacted on 26 June 2026 and applies from 1 July 2027. The Coalition opposed the Bill through a dissenting Senate report, but it passed with amendments. The reform remains politically contested, but it is legally settled. Planning on the basis that it might not proceed is no longer a defensible position.
Amendments secured in the Senate in June 2026 include:
- The small business active asset reduction turnover threshold raised from $2 million to $10 million
- Capital gains subject to the 30% minimum tax reduced by deductible gifts and donations
- A new start-up CGT concession, relevant to founders and early-stage investors
Who is affected by the new CGT rules?
The new regime applies to Australian resident individuals, trusts and partnerships holding CGT assets of any class: shares, ETFs, listed investment companies, managed funds, and unlisted business interests. In practice, the holders with the most at stake are:
- Founders and shareholders in private companies
- Family business owners
- Trusts holding business interests
- Private equity and joint venture investors
- Holders of intellectual property such as patents, trademarks, software and licensing rights
Pre-CGT assets are no longer exempt. Assets acquired before 20 September 1985 lose their exempt status: gains accruing from 1 July 2027 become taxable under the new regime. If you hold a business or asset that has been outside the CGT net for four decades, a 1 July 2027 valuation is now essential. Sherwood Australia can value these long-held assets and establish the baseline that limits your exposure to gains accruing after the transition.
Why is a business valuation at 1 July 2027 essential?
Under the transitional rules, gains on assets held across 1 July 2027 are split into two components:
- The portion accrued before 1 July 2027 keeps the 50% CGT discount
- The portion accrued from 1 July 2027 is taxed under indexation plus the 30% minimum
Determining that split requires the market value of the asset as at 1 July 2027. There are two paths: an independent market valuation, or the ATO’s apportionment formula via an official digital tool.
For listed securities, the quoted price does the job. For private companies, unlisted interests and IP, there is no observable price. The 1 July 2027 value becomes a permanent number in every future capital gains calculation, and an independent valuation is the only way to establish it on your asset’s actual history rather than a formula’s assumption. This is exactly the work Sherwood Australia does: independent, AFSL-licensed valuations of businesses and intellectual property.
Can I rely on the ATO formula instead of a valuation?
You can, but for most private businesses you shouldn’t. The ATO apportionment formula applies a constant compound growth rate across the holding period. It assumes your asset grew smoothly and evenly from acquisition to sale.
Growth in private businesses is rarely linear. Value creation concentrates in specific periods: a product launch, a major contract, a capital raise, an acquisition, a phase of rapid expansion. A business that did most of its growing before 1 July 2027 will be understated by the formula, shrinking the portion of gain that still qualifies for the 50% discount and inflating the tax bill.
How much can the valuation method matter?
Consider an investor who acquired shares in a private company for $1 million in January 2020 and sells for $5 million in January 2030. The company grew strongly early, then plateaued well before the transition date.
| ATO FORMULA | INDEPENDENT VALUATION | |
|---|---|---|
| Acquisition cost (Jan 2020) | $1,000,000 | $1,000,000 |
| Estimated value at 1 July 2027 | $3,400,000 | $4,500,000 |
| Sale price (Jan 2030) | $5,000,000 | $5,000,000 |
| Pre-2027 gain (50% discount applies) | $2,400,000 | $3,500,000 |
| Post-2027 gain (new regime applies) | $1,600,000 | $500,000 |
| Gain shifted to favourable tax treatment | – | +$1,100,000 |
The independent valuation shifts $1.1 million of gain into the more favourably taxed pre-2027 period. The difference is driven entirely by the valuation method.
The formula value is derived by applying a constant compound growth rate across the holding period, illustrative of the apportionment methodology.
Want to model your own position?
Sherwood Australia is here to do your valuation. We can walk you through how the enacted changes apply to your specific holdings, what an independent valuation at 1 July 2027 involves, and what timing makes sense. Initial discussions are confidential and at no cost.
When should I get my valuation done?
At or close to 1 July 2027, and the engagement should start well before that. Two reasons:
Contemporaneous evidence is stronger. A valuation prepared at the transition date reflects conditions as they actually existed and can be supported by market data. A retrospective valuation prepared years later is inherently less reliable and more open to ATO challenge.
The profession will be at capacity. The Institute of Public Accountants has warned that valuers and advisers will be stretched as the deadline approaches. Every private business owner in Australia needs the same valuation at the same date. Engaging Sherwood Australia early secures your place in the queue and gives time to get financial records in order before the work begins.
Steps for Investors and Business Owners
- Identify affected assets. Private company shares, trust and joint venture interests, IP including patents, trademarks and software. Include pre-1985 assets, which are no longer exempt.
- Get your records in order. Financial statements, management accounts, forecasts and asset registers, accurate and current before the valuer starts.
- Engage an independent valuer early. Sherwood Australia is taking 1 July 2027 valuation engagements now, well ahead of the capacity crunch.
- Coordinate multiple shareholders. A single independent valuation process all shareholders can rely on is cheaper and more consistent than several.
- Check the small business concessions. The active asset reduction turnover threshold is now $10 million, and a new start-up CGT concession exists. These interact with the valuation and are worth reviewing with your tax adviser.
Why an AFSL-licensed valuation matters.
ASIC classifies equity valuation as a financial service under the Corporations Act. Sherwood Australia holds Australian Financial Services Licence 563351, which means valuations are provided under a regulated framework. For valuations relied on for tax positions, shareholder transactions, or ATO review, this distinction matters.
Disclaimer
This article is general information only and does not constitute tax, legal or financial advice. While the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is enacted, ATO guidance including the apportionment tool continues to be finalised. Obtain advice specific to your circumstances before acting.
Frequently Asked Questions
What changes on 1 July 2027?
The 50% CGT discount for individuals, trusts and partnerships is removed under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. It is replaced with CPI cost base indexation and a 30% minimum tax rate on net capital gains. Gains accrued before 1 July 2027 keep the 50% discount; gains accruing after fall under the new regime.
Is the CGT reform law or still a proposal?
It is law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed Parliament and was enacted on 26 June 2026, with effect from 1 July 2027. The Coalition opposed it, but the legislation is settled.
Who needs a valuation at 1 July 2027?
Anyone holding an unlisted asset across the transition date: private company shares, family business interests, trust and joint venture interests, private equity holdings, and IP such as patents, trademarks and software. Pre-CGT assets acquired before 20 September 1985 also need a valuation, as their exemption ends for gains accruing from 1 July 2027. Listed securities do not need a formal valuation. Sherwood Australia provides independent valuations for all unlisted asset types.
Can I use the ATO apportionment formula instead of a valuation?
Yes, via an official ATO digital tool. But the formula assumes constant compound growth across the holding period, which understates the pre-2027 value of any business that grew unevenly. That describes most private businesses. An independent valuation from Sherwood Australia captures actual market value at the transition date and is the more defensible position.
What happens to pre-CGT assets acquired before 20 September 1985?
They lose their exempt status. Gains accruing from 1 July 2027 on pre-CGT assets become taxable under the new regime. A 1 July 2027 valuation establishes the baseline, so tax applies only to growth after that date.
When should I get my business valuation for 1 July 2027 done?
At or near 1 July 2027, with the engagement starting well beforehand. Contemporaneous valuations are more defensible than retrospective ones, and the IPA has warned the profession will be at capacity as the deadline approaches. Sherwood Australia is booking 1 July 2027 engagements now.
What small business concessions apply?
Senate amendments raised the small business active asset reduction turnover threshold from $2 million to $10 million, capital gains under the 30% minimum tax are reduced by deductible gifts and donations, and a new start-up CGT concession was introduced.
Why does Sherwood Australia hold an AFSL for valuations?
ASIC classifies equity valuation as a financial service under the Corporations Act. Sherwood Australia holds Australian Financial Services Licence 563351, which means valuations are provided under a regulated framework. This matters when the valuation is relied on for tax positions, shareholder transactions, or ATO review.
What does a Sherwood valuation engagement involve?
An initial confidential discussion to understand the asset, its history and the purpose of the valuation. A scoped proposal covering methodology, timing and fee. Engagement and information gathering. A draft valuation for review, followed by a final report that meets professional standards and is suitable for tax, shareholder or regulatory purposes.
Prepare for 1 July 2027 with a confidential strategy session
The legislation is passed and the deadline is fixed. Whether you’re a founder, shareholder, trustee or IP holder, Sherwood Australia is here to do your valuation and help you understand exactly what the new rules mean for your position. Initial conversations are confidential, senior-led, and at no cost.