Budget 2026 and the 2027 tax window: five moves SME owners and investors should make now
The 2026–27 Federal Budget, handed down on 12 May, contains some of the most significant changes to investment and trust taxation Australia has seen in decades. Most of the coverage has focused on housing. For business owners and investors, the more important shifts sit just beneath the headlines, in the treatment of capital gains and discretionary trusts. These measures are not yet law, but they have already started to change how owners think about structure, timing and value.
The reforms also create something the market rarely gets: a clear deadline. With the capital gains and negative gearing changes set to apply from 1 July 2027, and the trust measures from 1 July 2028, owners now have a defined window to review their position and act with intent.
At Morgan Shaw Advisory, we approach moments like this the way we approach every value question. Value is engineered, not discovered. The owners who do well over the next 18 months will be the ones who treat this budget as a prompt to prepare rather than a reason to wait. Our EBITDA+ SIX STEPS TO SUCCESS™ framework exists for exactly this purpose: closing the gap between what a business is worth today and what it could be worth when it matters most.
Why this matters now
Australian businesses are already operating in a recalibrating market. Interest rates remain elevated, inflation has proven sticky, and valuations have adjusted to match. Capital has not disappeared, but it has become far more disciplined. Private equity fundraising recently fell to a seven-year low, with global capital raised at around US$592 billion as higher rates, stalled exits and an oversupply of managers weighed on commitments. You can read our take on that in Private equity hits a wall: fundraising at a seven-year low.
Deal activity tells a similar story. Australia's M&A market moved through a tale of two halves over the past year, with an active first half driven by strategic deals giving way to a more selective second half as rates and regulatory pressure rose, as we set out in Australia's M&A market: a tale of two halves. Even so, well-prepared businesses in resilient sectors such as infrastructure, healthcare, resources and technology have continued to attract strong interest from both strategic and private equity buyers, a pattern we covered in our Australian M&A and capital markets wrap.
Against that backdrop, the budget adds a structural layer to an already selective environment. The changes directly affect investment behaviour, ownership structures, the timing of exits and acquisitions, and the cash flow SMEs have available to reinvest. For founders, family businesses and investors, that makes the next 12 months a genuine decision window.
This piece is for the people those decisions land on: SME owners, founders thinking about an exit in the next few years, family businesses running discretionary trusts, and buyers looking to acquire in a tighter market.
What the budget actually changed
Property reform points to a bigger shift in capital
The negative gearing and capital gains changes have been framed as housing policy. Limiting negative gearing to new residential builds from 1 July 2027 will influence where property investors put their money, but most analysis, including Treasury's own position, points to housing supply as the real driver of affordability rather than tax settings alone.
The more interesting effect is behavioural. When the after-tax return on a familiar asset class changes, capital starts looking for somewhere else to work. For many investors, that question leads toward operating businesses, private markets and other productive assets. The property headline is really a story about where capital goes next.
The capital gains change reaches well beyond property
Here is the part many owners have missed. The replacement of the 50 per cent CGT discount with cost base indexation and a 30 per cent minimum tax on gains does not stop at residential property. It applies to capital gains across the board for individuals, trusts and partnerships, which includes the sale of a business or shares. Gains that accrue before 1 July 2027 keep their current treatment, and gains after that date fall under the new rules.
For anyone planning to sell a business in the next few years, that is a material change to after-tax proceeds. It also raises the value of getting the numbers right well before a sale, because the gap between a well-structured exit and a rushed one has just widened.
Your trust structure is now a live question
The budget also introduces a 30 per cent minimum tax on the income of discretionary trusts from 1 July 2028. With more than 900,000 family trusts in Australia, this affects a planning mechanism that many business owners have relied on for years without revisiting.
In our experience, a change like this rarely stays contained to tax. Once owners open up the question of how their trust is taxed, they tend to ask the bigger ones close behind it. Is the structure still right for how the business operates? Who should own what? What happens at succession or sale? Those are healthy conversations to have, and the timing now forces them.
The M&A view: what we expect over the next 18 months
Restructuring will come before transactions
Policy change rarely produces deals straight away. It produces preparation. We expect restructuring activity to rise first, as owners review entity structures, separate assets from operating businesses, clean up financials and distributions, and align ownership with where they want to end up. This is consistent with what we see in every successful transaction. The value is built well before a deal is launched.
Buyers will keep paying for clarity
Uncertainty always sharpens buyer behaviour, and the current market has amplified it. Buyers are weighting quality of earnings, governance, transparent reporting and the strength of the management team more heavily than they did a few years ago. Well-prepared businesses continue to command premium outcomes. Those that are not prepared face price pressure, longer timelines, or both.
Strategic logic will beat speculative pricing
Lower growth and higher capital costs have shifted the balance. Deals with a clear strategic rationale are completing. Deals built on aggressive assumptions or hopes of multiple expansion are stalling. In a market where execution quality defines the result, the businesses that have done the work hold the advantage.
How we help owners get Game Ready
At Morgan Shaw Advisory, our EBITDA+ SIX STEPS TO SUCCESS™ framework is built to close the gap between current value and future potential through deliberate, structured work. Over the next year, that means:
building a strategic plan that reflects current market conditions and the coming tax changes
strengthening financial and operational foundations so the business stands up to buyer scrutiny
identifying and executing the value-creation initiatives that actually move the number
running an exit readiness assessment and gap analysis well ahead of any transaction
The owners who succeed in this market are the ones who have already done this work. Preparation is the difference between negotiating from a position of strength and reacting to whatever the market hands you.
Five moves to make in the next 12 months
Review your structure now. Do not wait for the 2027 and 2028 start dates to approach. Assess whether your current trust and ownership arrangements still suit how the business runs and where you want it to go.
Model your tax position under both sets of rules. Understand your exposure under current settings and the proposed ones. That comparison tells you whether to hold, restructure or transact.
Bring forward readiness, not just timing. If a sale is on the horizon in the next two to three years, preparation should begin now. Value is built before a transaction, not during it.
Focus on what buyers reward. Clean financials, clear governance and a credible growth story will matter more than ever in a selective market.
Get an independent view of your value. Knowing what your business is worth today, and what is holding the number back, is the starting point for every decision that follows.
Where to start
This budget has brought policy change, a recalibrating market and a clear timeline into rare alignment. The question for most owners is not whether the changes will affect them. It is whether they will be positioned to benefit.
If you are reviewing your structure, weighing a transaction, or simply want to understand where you stand, the next 12 months reward those who move early. Explore our latest market updates and resources and our thought leadership papers, or start a conversation with our team about getting your business Game Ready for what comes next.
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This article is general in nature and does not constitute financial, tax or legal advice. The tax measures described were announced in the 2026–27 Federal Budget and are not yet law. Seek advice tailored to your circumstances before acting.