The Legal Side of Your 1 July 2027 Valuation

The capital gains tax change is now law. If you hold your shares, units or business personally or through a trust past 30 June 2027 and sell later, their market value just before 1 July 2027 will matter. Your accountant will talk to you about the tax. I want to talk about what that value rests on, because much of it is legal.

What has changed

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Cth) received assent on 26 June 2026. In short, and leaving the detail to your accountant:

1. For CGT events from 1 July 2027, the 50% CGT discount generally no longer applies to gains that individuals and trusts make, and indexation of the cost base takes its place (Income Tax Assessment Act 1997 (Cth), ss 110-36(1A) and 115-100).
2. If you hold an asset personally or through a trust at 30 June 2027, you're treated as having sold and bought it back at its market value just before 1 July 2027. The gain to that date is deferred until you actually sell, and it can keep the discount (ss 112-155, 112-160 and 112-165).
3. There is no deadline to sell. The ATO has said you don't need a valuation in place on that date, and that you shouldn't get one before it, because a valuation can't look forward (ATO, "CGT reform: guidance and market valuations", 19 October 2026).

So the change doesn't force a sale; whether it affects your timing is a question for your accountant. It's a reason to make sure that when your business is valued, the value is real, and that a buyer will later pay for it.

What a valuer and a buyer will look at

A value assumes the business owns what it appears to own and that it will transfer. These are the gaps I see most often.

1. Contracts that won't pass to a buyer

Your key customer, supplier and licence agreements are often where the value sits. The benefit of a contract can usually be assigned, but the obligations can't be transferred without the other party's consent. In practice that means a novation agreed by everyone (Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 at [32]).

In a share sale, the contracts stay with the company. But many contracts let the other party end or renegotiate them if control of the company changes. A buyer will read those clauses closely. If your largest customer can walk away when you sell, that affects the price.

What to do now:

1. List the contracts that matter, and check whether each is signed, current and with the right entity.
2. Note any consent, assignment or change of control clause.
3. Put informal arrangements into writing while relationships are good.

2. Intellectual property the company doesn't own

Copyright in work an employee creates as part of their job belongs to the employer (Copyright Act 1968 (Cth), s 35(6)). Work by a contractor is different. The web developer, software contractor, designer or photographer owns the copyright unless they've assigned it, and an assignment has no effect unless it's in writing and signed (s 196(3)). Paying for the work isn't enough.

Two other points catch owners out:

1. An owner who works in the business without an employment contract may personally own what they've created.
2. A registered business name gives you no exclusive right to the name. A registered trade mark does, for the goods and services it covers (Trade Marks Act 1995 (Cth), s 20). Check who the registered owner is. It's often a founder, not the company.

3. Company records that don't match

A buyer starts with the company's own records. The company must keep a register of members showing who holds its shares (Corporations Act 2001 (Cth), ss 168 and 169) and minute books recording its resolutions (s 251A). If the register, the ASIC record and what the owners believe don't match, that has to be fixed before a sale, and it's easier to fix now.

From 1 July 2027, the date the new CGT rules start to apply, companies will also have to give ASIC their directors' director IDs (Treasury Laws Amendment (Business Registries Stabilisation and Uplift) Act 2026 (Cth), Sch 1 Pt 1, inserting Corporations Act ss 205B(3)(ca) and 1741). That's another reason to tidy your ASIC records in the first half of 2027.

4. A shareholders agreement that doesn't deal with exit

If you have co-owners, your shareholders agreement should say how the business can be sold, whether a majority can require the others to sell on the same terms, and how an owner who wants out is bought out. Many agreements I review were signed years ago and say little about any of this. An agreed path to a sale supports the value. A dispute between owners undermines it.

5. A premises lease that a buyer can't take over

For many businesses, the lease is the contract a buyer cares about most. Check how long it has to run, whether it can be assigned and on what conditions, and whether a change in who owns the company counts as an assignment under its terms.

6. Key people without the right terms

A buyer pays for relationships with customers and staff. Your key employees' contracts should deal with confidentiality and with approaching customers and staff after they leave. Restraints are under review. The Commonwealth has released draft laws that would ban non-compete clauses for most employees, and clauses that stop any employee approaching co-workers. As at 25 October 2026 they are a draft only. Review these contracts now rather than in the middle of a sale.

The structure question

Who owns what matters too. If the premises, the brand or key equipment sit with an owner personally, or with another entity, the value of the business may not include them. Your accountant advises on the tax effect of any change in structure. My part is the legal side: making the ownership match the plan.

Where to start

None of this needs to wait for 1 July 2027. Working through these six points now helps make sure that, whenever your business is valued, the value reflects a business that will transfer.

If you'd like to work through them for your business, you can book a consultation with me.

The law in this article is stated as at 25 October 2026. Tax advice is a matter for your accountant.

Joe Kafrouni, Director and Accredited Specialist (Business Law), Kafrouni Law

Disclaimer

The information provided by Kafrouni Law is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Law makes no warranties or representations regarding the information and excludes any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Law.

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