Introduction
The May 2026 Federal Budget included proposed changes to Australia’s capital gains tax rules. While most headlines have focused on property investors, these changes could also affect business owners who are thinking about using a Members’ Voluntary Liquidation, or MVL, to wind up a solvent company.
For many SME owners, an MVL has been a useful way to extract surplus assets or retained profits from a company in a tax-effective way. If the proposed CGT changes become law, the timing and benefits of that strategy may need to be reviewed.
What’s proposed to change?
From 1 July 2027, the Government has proposed changes to the way capital gains are taxed. Broadly, this may include replacing the current 50% CGT discount with an indexation-style approach and introducing a minimum tax rate on capital gains.
The final details will matter, and the changes are not yet law. But the direction is clear: capital gains may become less concessional for some taxpayers.
Why does this matter for MVLs?
An MVL is used when a company is solvent and its shareholders want to formally wind it up. Once creditors (if there are any) are paid, the liquidator distributes the remaining assets to shareholders. In some cases, those distributions can be treated as capital rather than dividends. That can be attractive because shareholders may be able to access CGT treatment, use capital losses, or apply small business CGT concessions where available.
If the general CGT discount becomes less generous, the tax benefit of receiving capital distributions through an MVL may also reduce.
The biggest issue: timing
For business owners already considering an MVL, timing is now a key issue.
Companies that are dormant, no longer needed, holding surplus cash, or part of a planned retirement or succession strategy should be reviewed sooner rather than later.
That does not mean everyone should rush into liquidation. But it does mean advisers and clients should start asking:
- Is an MVL likely in the next few years?
- Would current CGT rules produce a better result?
- Are small business CGT concessions available?
- Is there a commercial reason to wind up the company now?
Small business CGT concessions remain important
The good news is that the small business CGT concessions are expected to remain available. For eligible business owners, these concessions can still provide significant tax benefits, including the 15-year exemption, retirement exemption, active asset reduction and rollover relief. If the broader CGT rules become less favourable, eligibility for these concessions may become even more important in MVL planning.
It’s important that you make sure you speak with your accountant or tax adviser for advice in these areas!
What advisers should be doing now
Accountants and tax advisers should consider reviewing clients with companies that are no longer actively trading or are likely to be wound up in the medium term.
This may include:
- dormant companies;
- companies with retained earnings or surplus assets;
- business owners approaching retirement;
- groups preparing for succession;
- companies holding assets that may be distributed to shareholders.
Early planning gives clients more options. Waiting until the rules are finalised may leave less time to act before any commencement date.
Key takeaway
MVLs are likely to remain an important tool for business owners winding up solvent companies. However, the proposed CGT changes could reduce some of the tax benefits historically associated with capital treatment.
For clients already considering an MVL, now is the time to review the structure, model the tax outcomes and decide whether action should be taken before the proposed 1 July 2027 start date. There may also be a compelling reason to act sooner rather than later. Under the proposed CGT changes, business owners who retain company structures beyond 1 July 2027 may need to obtain formal valuations to establish the market value of their shares and other assets at the commencement date. For some clients, completing an MVL before the new rules take effect could simplify future tax compliance and avoid the cost and complexity of obtaining retrospective valuations.
As always, any decision should be based on both tax and commercial considerations, and advice should be tailored to the client’s circumstances.
Contact us for further information, or a discussion on how this might impact your business structures.
Disclaimer: The measures discussed are proposed legislation announced in the 2026–27 Federal Budget and are not yet law. Professional advice should be obtained before implementing any restructuring or liquidation strategy.
