The recording of our September Prime Insights session, presented by James Carey.
You might have a trading company, a family trust with its own corporate trustee and a separate entity that owns the business premises. There may also be an investment company that has lent money back to the business, or a company that has not traded for years. Each was set up for a reason. Whether your business structure should change before 2027 depends on what each entity still does, and the Budget has now put dates against that question.
The capital gains and negative gearing reforms are now law and apply from 1 July 2027. A minimum tax on discretionary trusts is proposed from 1 July 2028, and the restructure rollover window would close on 30 June 2030. Our Federal Budget summary explains these measures in more detail.
In our September Prime Insights session, Business structure: Is yours still the right fit?, James Carey worked through a family group with seven entities, explaining which could be wound up and in what order. This article follows that example. The hour-long recording also includes the group diagram, which is useful to have in front of you as you work through the figures below.
What each structure is there to do
There is no ranking from best to worst. Answer the commercial question first, then price the tax cost of exercising that choice.
- Sole trader. A simple activity owned by one person, who carries the liabilities personally.
- Partnership. A defined venture with shared interests, where profits, decisions and exits need to be agreed in writing.
- Company. Trading and admitting shareholders, with retained capital that the company itself owns.
- Family trust. Family ownership with adaptable distributions, where losses stay inside the trust.
- Unit trust. Defined proportions for joint investment, where deed rights and state taxes both matter.
- Corporate trustee. A company acting as legal trustee, whose capacity needs identifying in every transaction.
A customer claim against the trading business is a different risk from owning the warehouse, and separating the two is sound. What tends to happen over time is that guarantees, security and money lent back into the business reconnect the risks that were separated, which is worth testing while the business is healthy and there are still choices available.
The dates that change the arithmetic
| Date | What happens |
|---|---|
| 12 May 2026, 7.30pm AEST | Negative gearing cut-off for affected purchases |
| 31 October 2026 | Self-lodged tax returns due |
| 1 July 2027 | Main CGT and negative gearing reforms apply |
| 1 July 2027 to 30 June 2030 | Proposed trust restructure rollover window |
| 1 July 2028 | Proposed minimum tax on discretionary trusts begins |
The CGT and negative gearing package is law. The trust minimum tax, the election regime and the rollover are still exposure drafts, with consultation having closed on 18 September 2026, so any plan built on them should model the numbers now and flag which steps depend on legislation that has not settled.
What the capital gains transition asks of you
No tax bill arrives simply because 1 July 2027 does. The work is to separate earlier growth from later growth and apply the right treatment to each component.
Indexation replaces the general 50% discount for affected later gains, and the 30% figure sets a minimum income tax rate, which does not operate as a flat rate across all gains. Pre-CGT assets, including those held inside companies, enter the regime for growth after 1 July 2027. The draft splits gains using compounding growth, so a straight-line apportionment will give you the wrong number, and the small business 50% active asset reduction moves to a $10 million turnover threshold.
Take a resident individual holding an asset for more than twelve months with no concessions or losses, and assume 10% indexation:
- Original cost base: $500,000
- Supported transition value at 30 June 2027: $800,000
- Later sale proceeds: $1,000,000
- Earlier gain of $300,000, after the 50% discount: $150,000
- Later gain of $1,000,000 less $800,000 × 1.10: $120,000
- Combined assessable gain: $270,000
The combined figure is the assessable gain, before losses, adjustments and the final tax calculation, and the minimum tax is directed at the later component only, which is why a sale timed to beat July 2027 still needs the calculation behind it. Between now and then the work is evidence, so keep cost records and supportable valuations for private company shares and property.
Negative gearing and the new cash flow maths
From 1 July 2027, a loss on affected established residential property purchased after Budget night can no longer simply reduce salary or business income. The purchase date decides whether a property is grandfathered, and new housing retains the 50% discount. Commercial property and shares sit outside the restriction, which is aimed at residential property.
A company or a trust does not change that outcome. A $20,000 loss at a 47% marginal rate has an after-tax cost of $10,600 today. If the property is caught, the full $20,000 is quarantined from 1 July 2027.
What a minimum tax on discretionary trusts would do
Under the proposal, the trustee pays a 30% minimum tax on relevant net income. On $100,000 allocated to an individual, the trustee pays $30,000, and the beneficiary receives a non-refundable offset. If the beneficiary's own tax would have been $12,000, there is no $18,000 refund. If their comparable tax is $45,000, a further $15,000 may be payable. Some trusts and some categories of income are excluded, which is set out in the ATO's guidance on the proposed minimum tax.
A corporate beneficiary is a company used to receive and retain trust income, and under the September draft it gets no offset for the trustee's minimum tax. The same distribution pattern then adds a layer. On $100,000, the trustee pays $30,000 and the company is still assessed on $100,000 and pays $30,000, taking the total to $60,000 before any dividend reaches a shareholder.
The company itself can stay. What stops in 2028 is the annual distribution into it, and what remains is an investment company holding whatever is already there. So the first piece of work is classifying every existing balance as a cash loan, an unpaid present entitlement, a separate trust arrangement or something else. In Bendel, the High Court held that the particular unpaid present entitlements before it were not Division 7A loans, and the deed and the resolutions were what mattered. Existing balances still need their own exit plan, and our note on the ATO's stance on trust distributions covers the compliance side.
Three routes from 1 July 2028
| Stay discretionary | Elect fixed entitlements | Convert to a company | |
|---|---|---|---|
| What moves | Nothing | Nothing. Deed, trustee and assets stay put | All required assets to one company, 2027 to 2030 |
| Tax | 30% minimum tax, with a non-refundable offset for individuals | No minimum tax. Beneficiaries taxed on fixed shares | Company tax, franking on exit, CGT deferred |
| Flexibility | Full discretion kept | Locked in. A wrong distribution revokes it permanently | Fixed shares, dividends follow share rights |
| Stamp duty | None | Not expected, though duty is state law and a deed change may be a resettlement | Duty on land and landholder assets, with relief to be tested |
James works through all three routes in the recording, using the same trust and the same $100,000, which shows how differently the outcomes behave once a business and a property sit inside the structure.
The election and the rollover are mutually exclusive for the same trust, so the choice depends on who is likely to own and benefit from the group over the next ten years. Under the proposed excluded election trust regime, nominated beneficiary proportions for income and capital must align, changes to nominations are permitted only on death or relationship breakdown, and the trust deed needs to allow the trustee to bind itself to fixed shares. The rollover defers CGT and generally passes tax costs to the transferee, and it settles nothing about state duty, GST, lender consent or existing loan balances. It does not release a guarantor.
When an entity has no job left
Finish this sentence for every company and trust in the group: “we still need this because…”. If the answer is that it has always been there, it belongs on the list.
Take a company with no net assets that is owed $250,000 by the trading company and owes $250,000 to the investment company. The balances cancel in a group consolidation and the legal obligations survive intact. Cash repayment is the straightforward route. Where cash is not available, the alternatives include a documented assignment or novation with express release and every necessary consent, a genuine set-off between the same parties in the same capacities, applying a valid distribution or dividend, converting debt to equity, or a forgiveness that has to be tested against Division 7A deemed dividends and the commercial debt forgiveness rules. If the trading company can repay only $180,000, the $70,000 gap is a real loss that the group has to allocate, and an accounting write-off changes none of it.
Only once each asset and liability has a destination does closure come into it. Voluntary deregistration requires every member to agree, no ongoing business, assets under $1,000, no liabilities or proceedings, and ASIC fees paid. Anything outside that generally points to solvent liquidation, and the ATO's guidance on winding up a company covers the deemed dividend and CGT consequences. Corporate trustees need the trustee role and legal title resolved first, and winding up a trust is separate deed and entitlement work. An ABN cancellation completes none of this.
Where the clean-up saves $4,000 a year in compliance and costs $12,000 once, it pays back in three years. A sequence that triggers $90,000 of tax and duty is a different conversation.
Same people, different hats
It is common for one person to hold several roles at once, as director, shareholder, trustee controller, beneficiary and guarantor, and each role carries its own rights and obligations. A trustee company acting for the family trust is not the same party as that company acting for itself, and it may hold the group's most valuable assets. A signature given as a director binds the company alone. Name the full party on every balance, so that the $250,000 sits between the trading company and the dormant company.
Can the structure carry the next owner?
Ownership questions arrive with a sale, a child joining the business, illness or retirement. An equal division of every entity between children can produce deadlock and a property dispute. Where one child buys into the business and the premises stay in a separate family arrangement with a lease, the shares, the property and the loan receivables each need an owner on paper. A vendor loan has to appear in both the estate plan and the sale documents, and a will does not dispose of company or trust assets, so the deed, the constitution, the will and any shareholder agreement need to say the same thing. Our business succession and transition advisory work starts from that alignment.
What a review should produce
Give the structure a light review from time to time, and a closer look before a major purchase, a change of ownership, refinancing, retirement or a sale. Ask your accountant for the group diagram and the loan schedule, which is usually where a review begins. Four things should come out of it:
- One current diagram of ownership and control.
- One reconciled schedule of assets, debts and entitlements.
- A reason to keep, change or close each entity.
- A costed sequence with decision dates against it.
That is the scope of a business structure review at Prime, and for groups facing the 2027 and 2028 dates it is worth having the diagram in front of you well before either one arrives.
Questions we are asked
Should I change my business structure before 2027?
Only where the structure no longer matches what you want the group to do. The capital gains and negative gearing reforms apply from 1 July 2027 and the proposed trust minimum tax from 1 July 2028, so the useful sequence is to confirm what each entity contributes, price what it would cost to change or close it, then decide against those dates.
Should I sell before 1 July 2027 to keep the 50% discount?
The sale date on its own is not the deciding factor. Growth before the transition date keeps its existing treatment and only later growth is affected, so the answer comes from a calculation across both components.
Does the trust minimum tax mean I should wind up my family trust?
There are three routes from 1 July 2028, and staying discretionary and paying the minimum tax is one of them. Where the trust holds a business that will pass to a child, the election and the rollover both lock in who receives what, so the ten-year ownership picture usually decides it.
Can I just deregister a company that has nothing in it?
Deregistration is available only where every member agrees, there is no ongoing business, assets are under $1,000, and there are no liabilities or proceedings. A company with loan balances on both sides has obligations to settle first, even where the net position is zero.
Do the negative gearing changes apply to my commercial property?
The restriction is directed at established residential property, so commercial property and shares sit outside it. A company or a trust does not change the position for residential property that is caught.
Bring the diagram
Watch the recording of Business structure: Is yours still the right fit? for the full worked example, including the group diagram and a walkthrough of the six steps involved in simplifying the structure. We run Prime Insights monthly, so keep an eye out for details of the next session.
If you’d like to discuss what these changes mean for your own structure, book a time with our team and bring your group diagram and loan schedule to the meeting.
