Founder and investor tax settings: What technology leaders need to know

The 2026–27 Federal Budget introduces structural changes to capital gains tax (CGT) and trust taxation that, while not sector‑specific, have direct implications for how technology businesses are funded, scaled and exited in Australia. For a sector where value is highly equity‑driven, these settings matter.

A shift from concessional to ‘real return’ taxation

The Budget confirms a fundamental change to the way capital gains are taxed:

• The 50 per cent CGT discount for individuals, trusts and partnerships will be replaced with an indexation method, ensuring only real (inflation‑adjusted) gains are taxed; and
• A minimum 30 per cent tax on net capital gains will apply from 1 July 2027.

While these measures apply prospectively only to gains accruing after 1 July 2027, they materially change the after‑tax profile of equity returns.

Why this matters for tech businesses

For tech companies, this is not an abstract tax change. It goes directly to:

Founder outcomes

• Founders typically realise value through capital events (sale, IPO, secondary transactions) rather than salary
• The new framework changes how those outcomes are valued after tax, particularly for long‑term, high‑growth assets.

Employee equity (ESOPs)

• Many tech businesses rely on equity to attract and retain talent
• A shift in effective CGT treatment may influence how employees perceive the value of options and equity participation with equity incentives becoming less compelling for Australian employees.

Early‑stage investment appetite

• Angel investors and venture capital (VC) funds are highly sensitive to after‑tax return profiles
• A move away from a flat discount toward indexation plus a minimum tax changes the risk/return calibration, particularly for high‑growth, high‑risk investments.

Under the current rules, the effective CGT rate is 23.5 per cent (the top marginal rate multiplied by 50 per cent) whereas under the proposed rules, capital gains will have a 30 per cent floor, and potentially taxed up to 47 per cent. In short, the Budget moves the system toward taxing real returns more consistently but with a higher effective floor on tax outcomes.

Timing now matters as much as structure

A key feature of the Budget design is prospective application:

• Current settings continue to apply to gains realised before 1 July 2027
• New rules apply to gains realised after this date.

For tech companies, this introduces a critical new dynamic - the timing of an exit or liquidity event can materially change after‑tax outcomes for founders, investors and employees.

This is particularly relevant for:

• Companies approaching a sale or IPO window
• Founders considering secondaries or partial liquidity
• Investors managing fund life cycles and exit timing.

Trust structures: A structural reset

The Budget also introduces a major reform to discretionary trusts:

• A minimum 30 per cent tax will apply to taxable income of discretionary trusts from 1 July 2028 whereby trustees of discretionary trusts will be required to pay this minimum tax and beneficiaries (excluding corporate beneficiaries) will receive non-refundable credits for the tax paid by the trustee; and
• A three‑year rollover relief period from 1 July 2027 to support restructuring.

The reform is designed to reduce income splitting and better align trust taxation with individual tax rates.

Why this matters for the tech ecosystem

Discretionary trusts are commonly used across the tech ecosystem for:

• Founder shareholding structures
• Angel investment vehicles
• Family office participation in early‑stage capital.

The introduction of a minimum tax at the trustee level changes the economics of these structures by:

• Reducing flexibility to optimise distributions across beneficiaries
• Narrowing the tax advantage relative to other holding structures
• Potentially prompting restructuring into companies or other vehicles.

The inclusion of a time‑limited rollover relief window signals that reform is intended to be structural, not incremental.

What tech leaders should do now

1.  Model future exit scenarios early

Tech companies should actively model how the new regime affects:

• Founder proceeds under different exit timings
• ESOP outcomes for employees
• Investor return profiles.

The difference between pre‑ and post‑July 2027 treatment may be material at scale.

2.  Revisit equity strategy and incentives

Boards and founders should consider:

• Whether current ESOP structures remain fit‑for‑purpose under new settings
• How to communicate changes in after‑tax value to employees
• Whether alternative incentive structures need to be explored, including rethinking the equity / cash compensation mix to achieve the same outcome

3.  Review ownership and investment structures

For founders and investors using discretionary trusts, the 1 July 2028 start date provides a clear horizon while the three‑year rollover relief period creates a defined window for restructuring. Planning ahead will be critical given the complexity of moving between structures.

A defining shift for tech capital formation

Collectively, these measures represent a meaningful recalibration of Australia’s tax system. It signals a deviation from a concessional, discount‑based approach, toward a system that taxes real gains more consistently across asset classes.

For tech businesses, the implications are clear. Capital formation, investor appetite and founder outcomes will increasingly be shaped not just by growth, but by how and when that growth is realised. This is a structural change rather than cyclical, and one that tech leaders should actively factor into their strategic planning over the next 12 to 24 months.

How BDO can help

BDO’s technology, media and telecommunications team works with tech businesses, founders and investors, and can help you assess how the proposed changes to CGT and discretionary trust taxation may affect ownership structures, employee equity arrangements, investment returns and the timing of future capital events.

We can help you model tax outcomes under different scenarios, review whether current structures remain fit for purpose, and identify practical options ahead of the 1 July 2027 and 1 July 2028 commencement dates so you can make informed decisions with confidence. Contact us today.

For further commentary on the 2026 Federal Budget, read our expert insights.