Capital gains tax reform for primary producers and agribusiness

Key takeaways:

New capital gains tax laws have been legislated. A cost-base indexation method and minimum 30% tax will replace the existing 50% CGT discount.

The timing of a future sale is important for farmland owners. An eligible property sold before 1 July 2027 can still access the existing CGT discount whereas properties sold after this date will be subject to the new laws.

Transferring agricultural assets between people or entities can also trigger a CGT event.

AUTHOR

Ross Paterson

National Agribusiness Leader

Capital gains tax (CGT) has always been an important consideration for agricultural businesses, because land typically represents a significant part of a farm’s overall value.

Capital gains tax (CGT) has always been an important consideration for agricultural businesses, because land typically represents a significant part of a farm’s overall value. With trusts being a popular structure for farming businesses due to asset protection reasons and flexibility around ownership, succession planning and income allocation, the changes (if legislated) could have substantial implications.

Main CGT changes introduced by the Federal Government

The CGT changes have now been legislated and will take effect from 1 July 2027. The key changes include:

New CGT calculation method:
The existing 50% CGT discount will be replaced with a cost-base indexation method, similar to the system used in the late 1980s and 1990s.

Minimum tax rate on capital gains:
A 30% minimum tax will apply to capital gains that accrue from 1 July 2027.

Time to transition ahead of CGT change:
Capital growth that occurs before 1 July 2027 will be treated under the existing rules, with the new rules applying only to future gains.

Expanded small business concession:
More businesses will qualify for the small business 50% Active Asset CGT Discount concession, with the turnover threshold increasing from $2 million to $10 million.

For primary producers, the practical impact depends on the type of asset, when it was acquired, how it is owned (i.e.: personal ownership or in a trust or company), and when a future sale occurs.

It is important to note that the 50% CGT discount has never applied to companies. Instead, companies generally include the full amount of a net capital gain in their taxable income, with the gain taxed at the applicable company tax rate. This is why the ownership structure is an important consideration when determining how the CGT reforms apply.

Impact of CGT reforms on property sales and land assets for farmers

Land transactions are often the largest financial decisions farming businesses make, particularly where properties have increased significantly in value over time.

The CGT reforms mean the timing of a future sale is an important factor for farmland owners. Where CGT applies, an eligible property sold before 1 July 2027 will retain access to the existing 50% CGT discount. Properties sold after this date will require a split calculation: gains accrued before July 2027 retain the existing treatment, while future gains will be subject to the new inflation-based approach and a minimum 30% tax rate.

For example, a farming family planning to retire in 10 years and use the sale of assets to fund the retirement will need to consider how these changes affect their plans. The same would apply to the sale of any other assets that could trigger a CGT event, such as shares or units in entities that hold agricultural assets.

The important step for primary producers is to understand the CGT position of each land holding ahead of time, so they can make informed decisions about whether, when or how to sell their agricultural property.

How CGT changes affect agricultural land and equipment transfers

Transferring agricultural assets between people or entities can also trigger a CGT event.

For example, a farming family may decide to transfer farmland from an individual’s name into a company or trust as part of a restructure. Although the land is still within the same farming operation, the transfer could be treated as a disposal for CGT purposes.

Another example is where parents transfer ownership of farmland to the next generation as part of a succession plan. Depending on the circumstances, that transfer may come with CGT obligations even when no cash changes hands.

CGT considerations can also extend to the transfer of other agricultural assets such as homesteads, water rights, or ownership interests in entities that hold farming assets.

For primary producers considering a restructure or succession change, it’s worth remembering that the timing and method of transferring assets can have a significant impact on the ultimate tax position.

Implications for investment in farmland and agricultural infrastructure

With the CGT reforms applying from 1 July 2027, primary producers and investors may need to reconsider future investments in farmland and related assets. There is now more to weigh up than the upfront cost and expected productivity gains. Future plans for the property – be it expansion, leasing, redevelopment or eventual sale – can affect the after-tax return on investment if the asset increases in value and a future disposal triggers CGT.

For example, a producer purchasing farmland on the edge of a regional centre may see value not only in agricultural production but also in possible rezoning or subdivision years later. If the property's value grows substantially, the CGT outcome on the sale could be very different under the new rules, making the ownership structure and exit strategy much more important from the outset.

Similarly, a family looking to purchase a neighbouring farm may compare buying the land in individual names to buying it through a company (where the CGT discount isn’t available but the new CGT discount cap also doesn’t apply). The decision becomes a trade-off between the company's flat tax treatment and the potential benefits of individual ownership over the long term.

Strategies for farmers and primary producers amid CGT reforms

The CGT reforms create an important review point for primary producers with significant land holdings or future expansion plans.

Primary producers and farmers should consider:

Establishing asset values and records before the changes apply

For established agricultural assets, particularly farmland, having accurate records of ownership history, acquisition details and valuations will be important. This provides a clearer reference point to work with moving forward.

Reviewing ownership arrangements

The ownership structure behind farmland and other significant assets can affect how future transactions are treated for tax purposes. Producers should review how their assets are owned, when they were acquired and whether future plans to sell, transfer or restructure ownership could create CGT consequences.

Considering CGT alongside succession planning

Succession decisions often involve some of the largest assets on the farm, particularly land. Before ownership passes to the next generation or structures change, producers and farmers should understand how those decisions may affect the future tax position of those assets.

Check whether your business qualifies for CGT concessions

The increase to the small business CGT concession turnover threshold means more businesses now fall within the eligibility range. Primary producers who are considering selling or transferring business assets should determine if these concessions apply to them.

Keeping commercial decisions front and centre

There is no doubt that tax forms part of the decision making process, but it should not drive decisions that don’t suit the needs of the business or the family. The most appropriate approach will depend on how the farm operates today, who owns the assets, and what the business needs to achieve over time.

The biggest risk for primary producers is making a major asset decision without a clear understanding of the CGT position attached to it.

Reviewing existing holdings now can provide a clearer picture of the potential impact of the new rules.

Will negative gearing changes impact primary producers and agribusiness?

While negative gearing is often discussed alongside tax reforms such as CGT, the 2026–27 Federal Budget changes are focussed on residential property investment.

For most primary producers, these changes will not directly affect farmland, agricultural operations or commercial property arrangements. The area to watch is where farming families have built wealth outside the core business through residential property investments, or are planning to use this strategy moving forward.

As part of the budget, only existing residential properties acquired before 12 May 2026 remain under the old negative gearing rules. For future purchases, only new builds are able to offset rental losses against other income. Losses from established homes can only be carried forward to:

Offset future property income: So if your property becomes profitable in the future, you can offset that profit with your accumulated losses.
Reduce your CGT: When you eventually sell the property, you can use any leftover losses to reduce the profit made from the sale.

For farming families with investments beyond the farm gate, this may be a factor to consider when weighing up the financial realities of future property purchases. The impact will depend on the role those assets play within the family wealth strategy, and whether the expected returns still align with the purpose of the investment.

How RSM can help

The capital gains tax changes introduced as part of the 2026–27 Federal Budget may have significant implications for farming families with investment assets and broader wealth planning considerations. The impact will depend on your circumstances including how assets are held, your future investment intentions and any planned asset disposals.

RSM’s experienced accountants and business advisers can help you:

understand how the new CGT rules may apply to your situation
assess the potential impact on future transactions
identify practical strategies to support your long-term financial and succession planning objectives.

To speak with an experienced adviser about how CGT changes could impact your agribusiness, please contact your local RSM office.