What do the upcoming CGT reforms mean for farmers?

The upcoming CGT reforms represent one of the most significant tax changes affecting agriculture in decades. This article explores why farming businesses are uniquely exposed, what is changing from 1 July 2027 and the practical questions farmers should be asking now. 

For many farming families across regional Australia, the farm is far more than a business asset. It is the family home, a livelihood and often the result of generations of hard work, sacrifice and stewardship. That is why the upcoming capital gains tax (CGT) reforms due to commence from 1 July 2027 are attracting close attention across the agricultural sector.

While the reforms are not scheduled to take effect until next year, they have the potential to significantly alter the tax consequences of transferring or selling farming properties, particularly where land values have increased substantially over time and assets have been held by families for decades. The agricultural sector finds itself at the centre of this conversation because farming businesses often hold high-value assets, much of which is tied up in land.

What do the upcoming CGT reforms mean for farming businesses?

At a high level, the upcoming reforms will replace the general 50% CGT discount with an inflation-based approach, introduce a minimum 30% tax on capital gains and apply new treatment to certain assets, including some that have historically sat outside the CGT regime. The changes are expected to apply to gains arising from 1 July 2027 onwards.  

For farming families, the significance of these changes cannot be understated. Rural land values have risen dramatically across many parts of regional Australia over recent years. Properties that may have been purchased by parents, grandparents or even great-grandparents can now be worth many times their original value.

A farming family purchased their property for $2 million several decades ago. Today, it is worth $10 million. That $8 million increase in value may have little impact on day-to-day farming operations, but under the upcoming CGT reforms, it could significantly influence the tax outcome if the property is sold or transferred.

Why is farming succession more complicated than other businesses?

Unlike many other business sectors, farming businesses are often built around a single, indivisible asset.  

• A manufacturing business can sell machinery.  
• A professional services firm can transfer equity.  
• A farm, however, relies on keeping the land together and productive. This makes ownership transitions inherently more complex.

"The upcoming CGT reforms could significantly increase the tax cost of transferring or selling farming land, particularly where values have risen substantially over many years," says Kimberley Lisle, Business Advisory Partner in PKF's Walcha office.  

"For farming families, that means succession and ownership decisions may need to be reviewed much earlier than they have been in the past."  

The implications extend beyond farm sales. Many farming families are currently thinking about how assets will eventually move from one generation to the next.  

The upcoming commencement of the reforms is prompting many producers to revisit questions they may have postponed for years.  

• Are existing ownership structures still fit for purpose?  
• Does the current succession plan still achieve the desired outcome?  
• Have all family members been consulted about the future of the farm?

Having grown up in a farming family herself, Kimberley understands that discussions about land are rarely just financial.

"Land is often tied to family history, identity and future opportunity," she says. "The most successful succession discussions are usually the ones that start early, involve the right people and give families time to consider all available options before major decisions need to be made."

Every farming business is different, and the right strategy will depend on factors such as ownership structures, family circumstances, long-term objectives and the future direction of the enterprise.

Regional Australia has always been built on long-term thinking. Farmers regularly make decisions today that may not deliver returns for many years. The same mindset can be invaluable when it comes to succession, ownership transitions and understanding how future tax changes may affect the business.

By starting conversations early, seeking appropriate advice and reviewing existing arrangements well before a transition occurs, farming families can put themselves in a stronger position to navigate both the opportunities and challenges ahead.

Questions our clients are asking their business advisers

What happens if I own assets that were previously exempt from CGT?

Under the upcoming reforms, certain assets that were previously outside the CGT regime, including some pre-CGT assets, may become subject to CGT on any growth in value from 1 July 2027 onwards. While gains accrued before that date are expected to retain their existing treatment, future growth may be taxed under the new rules.  

Do I need to obtain a valuation of my farm before 1 July 2027?

Our business advisory team are recommending that business and landowners consider obtaining a valuation around 1 July 2027, particularly where assets have experienced significant growth. A valuation may help establish the asset's value at the transition date and support how pre- and post-1 July 2027 gains are apportioned under the new regime.