‘Stay wary, plan ahead’: KPMG warns businesses as CGT turns 40

As capital gains tax in Australia turns 40, KPMG has reflected on the immense impact it has had on family businesses, succession planning, business variations and the use of structures.

Marking its fourth decade in operation since 1985, the firm noted the CGT anniversary (19 September) also fell on National Family Business Day, providing a prime opportunity to reflect on its influence.

Brent Murphy, KPMG tax partner, said this “striking coincidence” of dates also came at a time when the anticipated movement of wealth from intergenerational transfer was at its highest-ever level.

The alignment of dates served as a timely reminder of the potential impact of CGT on the continuity of family businesses already concerned by issues such as the amount of CGT that may be payable on transfers of ownership, according to Murphy.

“CGT was first introduced in Australia on 19 September 1985. This year, 19 September 2025 marks the 40-year anniversary of the tax,” he said.

“CGT was originally intended to ensure profits from the sale or transfer of assets, including business assets, were taxed as part of Australia’s broader income tax system. But over the years, CGT has evolved and now has a broader impact, especially in estate management.”

Murphy added that family businesses significantly contributed to the strength of the Australian economy given their focus on long term sustainability, their employment of over 50 per cent of the workforce and contribution of over 50 per cent to GDP.

As 40 years ticked by, KPMG said it was also important to think constructively about the implications of CGT on the transfer of assets and ownership based on the likely movement of $3.5 trillion in wealth expected over the next decade.

“A CGT liability arises on the market value of equity transferred, regardless of whether any payment or consideration for their interest has been received,” Murphy said.

“This imposes a potentially significant cost on the prior owners, who may not have recourse to funds to pay the CGT. Consequently, they may be reluctant to plan formal transfers, other than by way of Testamentary Bequest.”

On this, the most notable tax break for beneficiaries was the family home, as it was a significant and CGT-free asset.

“Property owners can pass on their primary place of residence and that can be of significant value and CGT-free if sold within two years of death of the benefactor. However, other bequeathed assets in intergenerational transfers should be planned with a view to the impact of CGT – including on family businesses.”

As CGT had influenced succession planning, business valuations and use of structures when “passing on the baton”, the firm also noted it was vital to remain aware and cautious of trigger events, small business CGT concessions and pre-CGT assets.

For family businesses, CGT could inflict various issues and could impact cash flow pressure, loss of legacy assets, complexity and compliance, inter-family disputes, as well as state taxes interaction.

Looking ahead, Murphy said CGT and its implications highlighted the need to stay on top of strategic, meticulous and careful planning.

“The past 40 years have shown that early, strategic planning with professional legal, tax, and financial advice is the key to preserving both the business and the family’s legacy. As we celebrate Family Business Day 2025, it’s a reminder that succession is not just a transaction, but a carefully managed journey.”