The 2026 Australian tax changes that nearly double a founder's exit

Australia's 2026-27 Federal Budget dropped a series of capital gains tax reforms that will reshape exit economics for every founder holding significant equity. The changes are not hypothetical: they have been announced in the 2026-27 Budget or are at advanced stages of passage, with hard start dates. For a founder selling a business worth AUD 10 million or more, the effective tax on that exit could shift from roughly 23.5% under the current regime to somewhere in the mid-40s under the new one. That is not a rounding error; it is the difference between walking away with AUD 7.6 million and walking away with AUD 5.5 million. The window to act, whether through restructuring, timing a disposal, or establishing genuine residency elsewhere, is narrowing. This piece sets out the mechanics, the numbers, and the practical considerations Australian founders need to understand before 1 July 2027.

What the 2026 Budget changed for founders

The 2026-27 Budget announced three interconnected changes targeting capital gains and high-wealth individuals. First, the longstanding 50% CGT discount is being abolished for assets acquired after Budget night, replaced by an inflation-indexed cost base model. Second, a 30% minimum tax rate now applies to capital gains and certain trust distributions, closing the gap that previously allowed founders to shelter gains through trusts and timing strategies. Third, Division 296 imposes additional tax on large superannuation balances, starting 1 July 2026.

Taken together, these Australia CGT changes affect 2026-era founders at every level of their exit planning. The reforms are designed to ensure that capital gains are taxed more consistently with ordinary income, particularly for high-net-worth individuals. The practical effect is that the structures many founders have relied on for decades: discretionary trusts, the 50% discount, and super contributions funded by sale proceeds: all become significantly less effective. The government's stated rationale is equity between wage earners and capital holders, but the immediate consequence is a much larger tax bill on any successful exit.

The end of the 50% CGT discount and what replaces it

Under the current rules, an individual who holds a CGT asset for more than 12 months receives a 50% discount on the capital gain. For a founder selling shares acquired years ago at minimal cost, this effectively halves the taxable gain. On a AUD 10 million exit with a negligible cost base, the taxable gain drops to AUD 5 million, taxed at the top marginal rate of 47% (including Medicare levy), producing a tax bill of roughly AUD 2.35 million: an effective rate of about 23.5%.

The replacement model indexes the cost base to CPI, so only real gains above inflation are taxed. In theory, this is fairer. In practice, for a founder whose shares were issued at nominal value (say, AUD 100) and are now worth millions, the CPI adjustment on that tiny cost base is almost meaningless. The inflation-indexed amount might lift the cost base from AUD 100 to AUD 140 over a decade. The taxable gain barely moves. Without the 50% discount, the full gain hits the top marginal rate. The new model helps property investors who bought at high prices and sold after moderate appreciation. It does almost nothing for founders whose equity went from near-zero to a large exit value.

The 30% minimum tax on gains and trust distributions

The second pillar of the reform is a 30% minimum tax on capital gains and trust distributions. Previously, a founder could distribute capital gains through a discretionary trust to beneficiaries on lower marginal rates: a spouse, adult children, or a family company. This allowed effective rates well below 23.5% in some cases.

Under the new rules, capital gains and trust distributions are subject to a floor rate of 30%, regardless of the recipient's marginal rate. A beneficiary earning AUD 18,000 per year who receives a AUD 500,000 trust distribution now pays at least 30% on that amount. The strategy of splitting gains across multiple low-income beneficiaries is effectively dead. For founders who structured their shareholdings through family trusts specifically to access this benefit, the change forces a rethink. The 30% floor, combined with the loss of the 50% discount, means the effective rate on a founder exit through a trust now sits comfortably above 40%. Founders considering an exit in 2026 or early 2027 should be modelling these scenarios with their advisers now, not after the rules take effect.

What it does to a founder exit: the numbers

Consider a founder who started a SaaS company in 2018, subscribed for shares at AUD 1,000, and receives an acquisition offer of AUD 12 million in 2027.

Under the current rules (pre-1 July 2027 disposal): the capital gain is AUD 11,999,000. The 50% discount reduces the taxable gain to approximately AUD 6 million. At the top marginal rate of 47%, the tax is roughly AUD 2.82 million. The founder keeps about AUD 9.18 million: an effective rate of 23.5%.

Under the new rules (post-1 July 2027 acquisition or disposal): the CPI-indexed cost base might be AUD 1,350. The taxable gain is AUD 11,998,650. No discount applies. At 47%, the tax is approximately AUD 5.64 million. The founder keeps about AUD 6.36 million: an effective rate of 47%.

That is a difference of AUD 2.82 million on the same transaction. The current regime effectively doubles the after-tax proceeds compared to the new one. For founders sitting on equity acquired before Budget night, the existing 50% discount still applies to those specific assets, but any new equity issued after the cut-off falls under the new regime. This distinction matters for founders considering additional funding rounds or share restructures.

Division 296 and large superannuation balances

Division 296 introduces an additional tax on superannuation balances exceeding AUD 3 million, commencing 1 July 2026. The revised legislation applies at the individual level and taxes realised earnings (not unrealised gains, as the original proposal suggested). The effective rate on the portion above AUD 3 million moves toward 30%, and above AUD 10 million it approaches 40%.

For founders who have made significant concessional and non-concessional contributions over the years, or who rolled proceeds from earlier exits into super, this is a direct hit. A founder with AUD 5 million in super now faces an additional tax layer on AUD 2 million of that balance's earnings each year. The compounding effect over a decade is substantial. Some founders are exploring withdrawal strategies or restructuring their retirement savings outside super entirely. This requires careful advice, because early withdrawal penalties and contribution caps create their own traps. Cosmos works with licensed Australian tax advisers and financial planners who can model the Division 296 impact against alternative structures for clients considering a move offshore.

Ceasing residency: the deemed disposal most people miss

This is the rule that catches founders off guard. Under CGT event I1, ceasing Australian tax residency triggers a deemed disposal at market value of every CGT asset you hold that is not taxable Australian property. Taxable Australian property is a narrow category: mainly Australian real property, interests in land-rich entities, and assets used in an Australian permanent establishment. Those stay in the Australian net and are taxed only when you actually sell. Almost everything else is caught, and for most founders that includes the shares in their own Australian company, unless it is genuinely land-rich, along with foreign shares, cryptocurrency and portfolio holdings.

You can elect to defer the gain, treating the assets as taxable Australian property until you actually dispose of them, but the election comes with strings. The deferred gain remains subject to Australian tax when you eventually sell, even if you are a tax resident of another country at that point. You also need to lodge Australian returns for as long as the deferral is in place. Many founders assume that moving to a zero-tax jurisdiction like the UAE eliminates their Australian tax obligations entirely. It does not, unless the assets are structured correctly before departure and the deemed disposal is managed with proper advice. Cosmos helps founders plan this transition through licensed partners who understand both Australian exit obligations and destination-country requirements, ensuring the move creates genuine commercial substance rather than a paper exercise that the ATO can challenge.

The window before 1 July 2027, and where founders are going

The critical date is 1 July 2027 for the CGT discount removal. Assets acquired before Budget night retain the 50% discount, but any disposal strategy needs to account for the 30% minimum tax on trust distributions, which applies from an earlier date. Founders who are genuinely considering an exit have a narrowing window to realise gains under the current, more favourable regime.

The UAE has become the most common destination for departing Australian founders, and the reason is straightforward: zero personal income tax and zero capital gains tax. Dubai's infrastructure, timezone proximity to Asia, and established professional services ecosystem make it practical rather than purely theoretical. But relocation is not automatic tax avoidance. The ATO scrutinises departures closely, particularly where founders maintain Australian business ties, family connections, or property. A poorly planned move can result in dual residency, where you pay tax in both jurisdictions. Cosmos advises on structuring genuine relocations through its licensed partners, covering everything from residency establishment to commercial substance requirements, so the move withstands ATO scrutiny.

Frequently asked questions

• Does the 50% CGT discount disappear for shares I already own? No. Assets acquired before Budget night retain the existing 50% discount. The new inflation-indexed model applies to assets acquired after that date.

• Will Division 296 tax unrealised gains in my super? No. The revised legislation dropped the unrealised gains component. Division 296 taxes realised earnings on the portion of your balance above AUD 3 million.

• Can I avoid Australian CGT by moving overseas before selling? Not automatically. CGT event I1 triggers a deemed disposal on certain assets when you cease residency. Genuinely taxable Australian property, mainly Australian real estate and interests in land-rich entities, stays in the Australian net and is taxed on eventual sale; but a typical private company's shares are not taxable Australian property, so they are caught by the deemed disposal unless you elect to defer. Professional structuring advice is essential.

• What is the effective tax rate on a founder exit after 1 July 2027? For a founder with a near-zero cost base exiting at the top marginal rate, the effective rate moves from roughly 23.5% under the current discount to approximately 47% under the new regime. The 30% minimum tax on trust distributions closes the main alternative route.

• Are these changes finalised? The measures are in advanced legislative stages as of mid-2026. Start dates and specific thresholds can still shift. Confirm all figures and dates with a qualified Australian tax adviser before making decisions.

These reforms represent the most significant shift in Australian capital gains taxation in two decades. Founders sitting on valuable equity have a finite period to assess their options. Whether that means accelerating an exit, restructuring holdings, or establishing genuine residency in a jurisdiction like the UAE, the cost of inaction is now quantifiable: potentially millions of dollars on a single transaction. Speak to a qualified adviser, model the numbers against your specific circumstances, and make the decision with full visibility of what the new rules mean for your exit.

This is general information, not tax advice. Exit-tax and departure-tax rules differ by country and change frequently; confirm your position with a qualified adviser in the relevant jurisdiction before acting.