Most people are focused on the headline tax changes from the 2026 Federal Budget.
But I think the bigger story is what happens next.
Because if the proposed capital gains changes are implemented as outlined, they may fundamentally change how Australian founders, manufacturers, SMEs and service businesses structure themselves moving forward.
The Traditional Founder Model
For years, many Australian business owners built around a relatively simple idea:
- Build enterprise value
- Grow the business
- Eventually exit
- Access long-term CGT concessions
That framework heavily influenced:
- ownership structures,
- trusts,
- investment decisions,
- succession planning,
- and founder risk appetite.
Now that the equation may be changing.
The Proposed Shift
The proposed reforms would:
- remove the 50% CGT discount for individuals, trusts and partnerships,
- introduce CPI indexation instead,
- apply a 30% minimum tax framework,
- and potentially alter how equity, options and long-term gains are treated from 1 July 2027.
Importantly:
- existing small business CGT concessions largely remain,
- consultation is still occurring for start-ups and early-stage businesses,
- and many details are not yet final legislation.
But regardless of where the final policy lands, one thing is already happening:
Business owners are reassessing structure.
Because incentives matter.
And structure follows incentives.
Why This Matters to the Australian Economy
Small businesses make up more than 97% of Australian businesses.
They employ more than 5 million Australians, roughly 40% of the private-sector workforce.
That is not a niche part of the economy.
That is the economy.
Yet building a business remains incredibly difficult:
- around 20% fail in their first year,
- roughly 60% disappear within three years,
- and only a very small percentage ever achieve a meaningful acquisition or exit.
Most founders never receive the payday people assume they do.
Which means structure and long-term incentives matter enormously.
Manufacturing Businesses May Move Toward Corporate Group Structures
For manufacturing businesses, I believe the post-2026 environment will accelerate more sophisticated structuring.
Why?
Because manufacturing businesses are:
- capital-intensive,
- operationally risky,
- asset-heavy,
- staff heavy,
- and constantly reinvesting.
In that environment, retaining profits inside corporate structures may become more attractive than distributing them.
Which is why we may increasingly see structures like:
Family Trust
Holding Company (Hold Co)
Operating Company (Op Co)
Where:
- Hold Co owns IP, retained profits and strategic assets,
- while Op Co carries operational risk.
Many manufacturers may also increasingly separate:
- commercial property,
- equipment ownership,
- trademarks,
- and trading operations.
This is not simply tax planning.
It is:
- asset protection,
- succession planning,
- acquisition readiness,
- and long-term scalability.
Service Businesses May Take a Different Path
Service businesses are different.
Many are:
- lower asset,
- founder-driven,
- cashflow-focused,
- and structured around annual distributions.
For smaller service firms, simpler trust/company structures may remain practical.
But scalable service businesses, agencies, tech-enabled services, SaaS operators and consulting groups may increasingly move toward:
- Hold Co structures,
- IP separation,
- employee equity planning,
- and retained earnings models.
Especially if future exits become less tax-efficient personally.
The Real Shift Is Philosophical
I think the biggest change is this:
For years, Australian business owners often structured their businesses around eventual personal capital gains outcomes.
Now, many may shift toward:
- reinvestment,
- retained earnings,
- long-term corporate growth,
- and asset protection strategies instead.
The focus may become:
- building enduring groups,
- not simply building to exit.
That changes founder behaviour.
It changes investment behaviour.
And over time, it may reshape how Australian SMEs scale entirely.
The Businesses Australia Needs Tomorrow Are Being Built Today
This debate is not about whether successful founders should pay tax.
Most successful business owners contribute enormous tax revenue long before any exit event ever occurs:
- payroll tax,
- company tax,
- GST,
- PAYG,
- superannuation,
- employment,
- exports,
- suppliers,
- and economic activity.
The bigger question is whether Australia’s policy settings continue encouraging people to take the enormous risks required to build businesses in the first place.
Because productivity growth does not come from government spending alone.
It comes from entrepreneurs:
- building companies,
- employing Australians,
- creating intellectual property,
- exporting products,
- and generating long-term economic value.
And the structures founders choose after 2026 may tell us a lot about where Australia’s business environment is heading next.
Disclaimer
General strategic perspective only.
Not tailored advice.
Apply with consideration to your own business context.