The CGT Formula That Will Value Your Business Hasn't Been Written Yet.

Senate hearings on the bill that replaces Australia's 50% capital gains tax discount begin today. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 would swap the flat 50% discount for an inflation-indexed rate with a 30% minimum threshold, starting July 1, 2027.

The change applies across all asset classes. Not just property. Shares, business goodwill, private company holdings, equipment. For business owners who've spent years building value in their company, the calculation that determines what they keep after a sale is being redrawn.

The compliance problem

The headline concern is cost. CPA Australia estimates that just valuing assets on the July 1, 2027 transition date will cost Australian taxpayers between $675 million and $825 million. That's a one-off hit before the new system even begins operating.

The deeper problem is that the apportionment formula, the mechanism that splits capital gains between pre-reform and post-reform periods, hasn't been developed. Treasury has confirmed the formula "is yet to be developed." Business owners are being asked to plan around a number that doesn't have a calculation behind it yet.

For listed shares, the transition is straightforward. You use the quoted market price on July 1, 2027. For everything else, including business goodwill, private company shares, and unlisted assets, the valuation is far more complex. CPA Australia warned that "goodwill and private company values cannot be simplified to a mechanical formula" because they depend on future earnings expectations, not linear time calculations.

The holding period trap

The holding period matters more than most owners realise. Under the current system, a business held for 13 months gets the same 50% discount as one held for 20 years. Under the proposed system, the discount is tied to the length of ownership and inflation over that period. Owners who bought or started a business within the last five years stand to lose the most. Longer holders are partially cushioned by accumulated inflation.

CPA Australia estimates ongoing annual compliance at $295 to $542 million per year over the next decade. Treasury's estimate is $88.4 million. The gap is significant and unresolved.

What to do

The Senate Economics Committee is due to report on June 22. That's one week. The hearings run today and tomorrow.

CPA Australia is pushing for a carveout: retain the existing 50% discount for active businesses with turnover below $20 million. If the carveout lands, many SME owners may be largely unaffected. If it doesn't, the planning starts now.

Get a baseline valuation of your business while it's a planning exercise, not a deadline. If the reforms pass, the July 2027 transition date will set the reference point for the new calculation. A valuation done under pressure, with hundreds of thousands of other businesses doing the same thing, will cost more and produce worse results than one done 12 months early.

Understand where you sit on the holding period spectrum. If you started your business in the last few years, the gap between the current 50% discount and the proposed indexed rate is widest. If you've held for 15 or 20 years, inflation narrows that gap. The impact is not uniform, and the right response depends on your specific timeline.

This article is general information only and is not financial advice.