Before the Term Sheet: Why the 1 July 2027 CGT Changes Matter for Australian Founders

Current as at 13 September 2026. This article distinguishes enacted law from exposure draft proposals.

Australian founders approaching a secondary sale, acquisition or business exit may be asking a deceptively simple question: should the transaction happen before or after 1 July 2027?

The enacted CGT reforms make that question more important, but they do not make it simple. For privately held businesses, the outcome can be sensitive to the history of the shares, when value accrued, what can be evidenced, whether the founder’s residence changes and how far commercial negotiations have already progressed.

The practical risk therefore starts before completion. Once a term sheet, secondary-sale process or acquisition timetable begins to harden, facts and commercial choices that were once flexible may become harder to revisit.

At a glance

The core reform is enacted. Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is in force, with the new CGT settings applying from 1 July 2027.

For affected taxpayers, the familiar discount framework is replaced by a different indexation-based regime, alongside a minimum-tax rule for certain capital gains. The legislation also contains transitional rules for assets held across the commencement date.

A separate Innovative Business CGT Concession was released only as exposure draft in September 2026. It may become relevant to some early-stage innovative-business investments, but it is not yet law and should not be assumed to apply to any particular founder or investor.

For founders, the recurring problem is not simply the headline date. Private-company valuation, evidence, transaction timing and international mobility can create several overlapping tax and commercial questions before a liquidity event.

1 July 2027 creates a tax boundary, not a universal sell-by date

It is tempting to turn a tax reform into a deadline: sell before the change, or wait until after it. The legislation does not support a universal answer of that kind.

The new rules distinguish gains accruing from 1 July 2027 and include transition mechanics for assets held across that date. For a founder who has built value in a private company over many years, that can make the evidence around the transition more important rather than making the historic facts disappear.

Two founders selling on the same date may therefore face materially different questions because their equity history, value creation, residence and transaction path are different. The headline date is a trigger for review, not a substitute for one.

Why the term sheet can matter before the tax becomes the headline

In a private-company exit, tax planning does not begin on completion day. A term sheet or advanced transaction discussion can start fixing the commercial timetable, price expectations and sequence of events well before final documents are signed.

That matters because a founder who waits until the transaction is effectively committed may discover that the most important tax question is no longer “what does the law say?” but “which facts and evidence were already fixed before anyone examined them?”

Private-company valuation can become an evidence problem

A listed share has an observable market price. Founder shares in a privately held company usually do not. The transition rules can make value around the commencement boundary relevant, which means a later sale may depend on evidence that was created years earlier.

The risk is not merely arriving at a number. It is whether contemporaneous material exists to support the commercial picture at the relevant time. Forecasts, board papers, cap tables, funding terms and business milestones are often created for commercial reasons and then scattered across different systems.

Years later, reconstructing a defensible picture can be substantially harder. A founder who waits until buyer due diligence to address the tax evidence may find that the evidence problem is already historical.

The startup concession is moving while the broader reform is already law

On 10 September 2026, Treasury released exposure draft legislation for an Innovative Business CGT Concession. The proposal would provide a 50% discount for gains from qualifying early-stage investments in innovative start-ups and includes draft design features such as a 15-year eligibility period, a three-year minimum holding period and removal of the proposed lifetime cap.

Those are exposure-draft settings, not enacted outcomes. Consultation is open until 28 September 2026 and the final law may change. The coexistence of enacted broad CGT reform and a still-moving targeted concession is precisely why a founder should not assume that a headline about “startup relief” answers the tax position for their shares.

A founder who may move overseas has more than one tax clock

Many founder exits are also mobility events. A founder may be considering Singapore, Dubai, the United States, the United Kingdom or another jurisdiction before a sale or secondary transaction.

Australian CGT outcomes can be sensitive to residence, the nature of the asset and the timing of relevant events. When a residence change and a liquidity event are both in view, a simple “before or after 1 July 2027?” heuristic can conceal the more important interaction between those events.

When this becomes a current problem rather than a 2027 problem

The issue is already live if a founder is entering secondary-sale or acquisition discussions, holds a material embedded gain in a private company, expects valuation evidence to be difficult to reconstruct, or may change residence before a liquidity event.

Those facts do not produce a universal tax answer. They indicate that the founder may be approaching a point where delay makes the evidence, commercial sequencing or available decisions harder to change.

Why a pre-exit readiness review is different from reading the rules

The legislation explains the legal framework. A pre-exit readiness review asks a different question: whether the founder’s current facts, evidence and transaction timetable create issues that should be surfaced before commercial terms become difficult to change.

Extax’s Founder Exit and Relocation Tax Consultation is designed as a structured preliminary review of the principal founder, entity and transaction tax considerations, time-critical decisions and information gaps. Detailed modelling, valuations, written advice, rulings and restructuring work are separately scoped where required.

Frequently asked questions

Are the 1 July 2027 CGT changes already law?

Yes. The core reforms are enacted. The separate Innovative Business CGT Concession discussed above is still exposure draft as at 13 September 2026.

Should an Australian founder sell before 1 July 2027?

There is no universal answer. The relevant outcome can depend on the founder’s equity history, transaction timing, evidence, residence and other facts. The date should trigger a review rather than a generic sell-or-hold rule.

Can private-company valuation matter under the transition rules?

It can. Private-company shares do not have an observable market price, and the availability and quality of contemporaneous evidence can become important when applying transition rules later.

Does moving overseas before an exit change the analysis?

It can materially change the questions that need to be considered. Australian CGT treatment is sensitive to residence and asset facts, so a planned relocation and a planned exit should not be analysed as unrelated events.

Official sources

Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — Federal Register of Legislation.

Budget 2026–27 tax changes — Australian Treasury.

Innovative Business CGT Concession consultation — Australian Treasury, exposure draft consultation.

General information only. This article is not tax, legal or financial advice and does not determine the outcome for any particular founder, shareholder or transaction. Legislation, exposure drafts and administrative guidance may change. Specialist advice should be obtained for the relevant facts before acting.