The CGT Changes, in Plain English: What SMEs Need to Know (And Why Your Team Should Hear It From You)

My LinkedIn feed has been full of it this week. Founders furious. Employees saying it’s about time the wealthy paid their share. Government friends applauding the levelling of the playing field. Everyone talking past each other.

I have opinions. But more importantly, I think there’s a conversation that needs to happen inside businesses, not just on social media, and most employers don’t know how to start it.

So here’s the plain English version of what’s actually changing, why it matters for SMEs specifically, and how you explain it to a team who thinks their boss is just cranky about paying tax.

What actually changed?

The 2026 Federal Budget scrapped the 50 per cent Capital Gains Tax (CGT) discount that has applied since 1999. From 1 July 2027, if you sell a business asset, shares, or investment property you built or bought, the gain will be taxed at your marginal rate, with a minimum floor of 30 per cent.

There’s a cost-base indexation to account for inflation, which sounds like relief but is largely irrelevant for founders. Most business owners have a nominal cost base, meaning the shares they hold in their own company are essentially worth nothing on paper until they sell. Indexation on zero is still zero.

For someone on the top marginal rate, the effective tax on a capital gain has moved from roughly 23.5 per cent under the old discount to up to 47 per cent under the new rules. That’s not a tweak. That’s a fundamental shift in the economics of building and exiting a business.

Discretionary trusts, which many small business owners use for legitimate tax planning and family income splitting, will also face a new minimum 30 per cent tax from 2028-29.

Why this hits SMEs differently to big business

This is the part that gets lost in the debate. Large corporations and foreign investors are largely unaffected. Corporate entities don’t access the CGT discount. Foreign investors already sat outside the regime.

The people this hits hardest are Australian individual business owners and founders, typically the people running the SMEs that employ most of Australia’s workforce.

And here’s the thing about SMEs: the exit is often the retirement plan. These aren’t wealthy investors sitting on passive portfolios. They’re people who have spent 10 or 20 years building something, often without a salary that reflected the hours they worked, betting on the eventual sale to make it worthwhile.

Layer that on top of the existing cost stack, and the picture starts to look quite bleak.

The tax stack that nobody talks about

Before we even get to CGT, running a business in Australia already looks like this:

• Company tax at 25 per cent on profit (or 30 per cent above the threshold)
• GST collected and remitted on every sale
• Payroll tax charged by state governments for the act of employing people, often kicking in at thresholds that catch growing businesses well before they feel ‘large’
• Superannuation guarantee, now at 12 percent and rising
• PAYG instalments paid upfront based on the previous year’s profit, before you know what this year looks like

And from 1 July 2026, payday super means super must be paid at the same time as wages, not quarterly. Another cashflow hit.

CGT is not an isolated change. It’s a new layer on an already heavy load.

The divide this is creating inside workplaces

Here’s where it gets uncomfortable from an HR perspective.

The public narrative around this budget has been framed as fairness: wealthy business owners and investors finally paying their share. That framing has landed. Employees are hearing it. Some are actively agreeing with it.

And if you’re a business owner who says nothing, your team fills the gap with whatever version of the story they saw on the news.

This isn’t about getting your team to agree with your political views. It’s about basic economic literacy. If your employees understand what it actually costs to run a business, they make better decisions. They understand why margins matter. They understand why headcount decisions aren’t arbitrary. They understand that a business owner who reinvests profits is not hoarding wealth.

The employer and employee relationship is already under strain. Fair Work legislation, right to disconnect, the general cultural swing toward employee rights, all of these have created an adversarial edge that didn’t used to be there. CGT isn’t going to fix that. But how you communicate through it might.

How to have this conversation with your team

You don’t need to hold a town hall or share your tax return. But a brief, honest conversation in a team meeting can go a long way.

A few things worth saying:

• What it actually costs to run this business. Not just wages. The full picture: tax, super, compliance costs, insurance, the lot. Most employees have genuinely never thought about it.
• Why changes like CGT affect investment decisions. If the financial reward for taking a risk shrinks significantly, fewer people take the risk. That affects job creation. That’s not spin, it’s economics.
• What you’re choosing to do anyway. If you’re still investing, still hiring, still committed, say so. People want to know the ship is still sailing.

You don’t have to be angry about it. You don’t have to pretend it doesn’t affect you. Just be honest.

The bottom line

The CGT changes are real, they hit founders and SME owners harder than anyone else in the system, and they’re landing on top of a cost base that was already significant.

The debate about whether this is fair will continue. That’s not something HR Gurus is going to resolve.

What we do know is that how you lead through uncertainty matters. If your team doesn’t understand the pressures you’re operating under, they can’t be part of the solution. And right now, you need them to be.

If you’re unsure how to have these conversations inside your business, that’s exactly what HR Gurus is here for. Get in touch.