Tax should facilitate succession, not dictate it
14 September 2026
Our team recently attended The Tax Institute’s Tax Summit 2026 held in Sydney. The Summit’s theme, “Powered by People”, resonated strongly with our work advising family businesses.
What struck us was not simply the complexity of the tax law, but how decisions made to achieve an immediate tax outcome can constrain a family decades later. Family trust elections (FTE) are a good example. An FTE continues after the specified individual dies and generally cannot be varied merely because of that death. It should therefore be treated as part of the family’s succession architecture, not simply as a tax compliance election. The specified individual should not automatically be the family patriarch or matriarch. The choice should be based on whose nomination will best serve the family group over the long term, having regard to its composition, intended distributions and likely succession arrangements.
The panel discussions on the recent tax reform announcements reinforced the need to review existing structures regularly. The proposed exclusion of primary production income from the minimum tax on discretionary trusts is particularly important for many of our clients. However, the carve-out is not itself a panacea. It does not resolve the treatment of every receipt or capital gain derived within a farming group. Some family groups may need to restructure. Others may consider the excluded election trust (EET) pathway, which the Government announced while the Summit was underway. Under the proposed EET regime, an existing discretionary trust could remain in place and avoid the minimum 30% tax by nominating beneficiaries to receive its income and capital in predetermined proportions. Although the trust would remain discretionary at law, retaining the exclusion would require it to operate on substantially fixed distribution terms. Neither the EET election nor the separate restructuring rollover is an automatic solution. Any income tax benefit must be weighed against transfer duty, GST, financing, asset protection, distribution flexibility and the family’s preferred succession arrangements.
The property session provided a similar reminder that characterisation and contemporaneous evidence matter. A farmhouse, worker cottage, rental dwelling or farm-stay accommodation may form part of the same property, but each may have a different use and tax treatment. The ATO is increasing its scrutiny of holiday homes, Airbnb properties and similar arrangements. Relevant considerations include whether the property is genuinely available for rent, whether it is offered on commercial terms and the extent of any private or family use. It is also necessary to distinguish between carrying on a business and passively holding a rental investment. That distinction does not determine whether all expenses are deductible, but it may materially affect particular deduction rules and access to the small business CGT concessions.
The presentation on Division 149 also brought into sharp focus the risk that assets held by companies and trusts may already have lost their pre-CGT status through changes in majority underlying interests. This assumes greater significance under the enacted CGT reforms. From 1 July 2027, assets that retain their pre-CGT status will be brought within the CGT regime with a reset cost base. The threshold question is whether Division 149 has already caused an asset to lose that status. If it has, the asset will not obtain the transitional cost-base reset.
For clients holding pre-CGT land, shares or trust interests, we will review the ownership history, identify changes that may have affected the underlying interests and determine whether pre-CGT status has been preserved. We will also work with clients to obtain the records and valuation evidence required to substantiate their position, recognising that this may involve reconstructing events extending back several decades.
The number of presentations dealing with death and taxes, business succession and the small business CGT concessions reflected in our view, the importance of small and family businesses to the Australian economy. It also demonstrated how closely tax, ownership and succession are connected. For family groups, succession planning should begin by considering who will operate the business, who will control its assets and how family wealth will be shared. For farming families, that includes how off-farm children will participate.
The review must encompass land, water, operating assets, trust control, FTEs, wills and access to the small business CGT concessions.
The lasting takeaway was that tax should facilitate succession. It should not dictate it.
Pious Matimati is a Tax Advisor at PrincipleFocus.
