Australia is heading into a generational succession wave. More than 300,000 small and medium business owners are already at or past retirement age, yet fewer than one in four has a documented succession plan. Without reform, many businesses will be forced into hurried sales, closures, or acquisition by large corporates. The consequences will be lost jobs, weakened regional economies, and diminished community wealth.
Internal succession through management buyouts, employee-led buyouts, or employee ownership trusts offers a practical way to protect continuity. Other countries have acted to support these models. Australia has not. This is now a public policy issue as much as a private business decision.
Why Policymakers Should Listen
Supporting employee-led succession is not only about helping founders exit. The benefits extend to the wider economy, society, and community.
For the economy: continuity prevents avoidable business failures, productivity rises when employees are engaged as owners, and resilience improves in downturns.
For communities: local jobs are preserved, regional economies are stabilised, and profits remain within communities rather than flowing to outside buyers.
For society: employee ownership spreads wealth more fairly and encourages long-term stewardship rather than short-term extraction.
For businesses: engagement and retention improve, client relationships remain stable, and succession becomes a structured and achievable goal.
Lessons from the United Kingdom
In 2014 the UK legislated the Employee Ownership Trust. Founders selling to a qualifying trust pay no Capital Gains Tax if the trust acquires a controlling interest and employees benefit equally.
The impact has been substantial. More than 1,500 UK firms have transitioned, including Riverford Organic Farmers and Richer Sounds. Independent studies show these businesses are more profitable, more resilient, and experience lower staff turnover.
Lesson: legislation with clear tax incentives makes employee ownership a mainstream choice.
Lessons from Canada
In 2023 Canada legislated the Canadian Employee Ownership Trust, effective for sales after 31 December 2023. This builds on Canada’s strong base of Employee Share Ownership Plans.
Canada also provides a Lifetime Capital Gains Exemption that allows business owners to shelter up to CAD $1.25 million when selling shares in a qualifying company. With more than three-quarters of Canadian private businesses expected to change hands within a decade, these measures are central to the country’s national succession strategy.
Lesson: clear legal frameworks combined with targeted tax relief create strong incentives for founders to consider employee-led succession.
Lessons from New Zealand
New Zealand has no legislated EOT or ESOP regime. Employee share schemes are available but attract no targeted tax incentives.
Succession is often handled informally, typically through discretionary trusts or family-style arrangements. Māori enterprises have pioneered collective stewardship models that emphasise intergenerational responsibility, but outside these communities adoption is limited.
Lesson: without policy support, adoption is fragmented, inconsistent, and fragile.
Where Australia Stands
Australia has some strengths. Company and trust law is flexible. The small business Capital Gains Tax concessions are generous by international standards. Reforms in 2022 made employee share schemes easier to implement.
But there are gaps. No EOT framework exists. There are no targeted tax incentives for sales to employees. Awareness among founders, advisors, and financiers remains low. Unless addressed, Australia risks following New Zealand’s path of under-preparation instead of the structured approaches taken in the UK and Canada.
A Policy Agenda for Australia
- Legislate an Australian EOT framework. Define trusts in law, require majority employee benefit, and reduce legal and compliance costs.
- Introduce targeted tax relief. Offer CGT exemptions or reductions for qualifying sales to employees or trusts, aligned with the existing small business concessions.
- Support succession financing. Encourage banks to back succession loans, develop surety-backed guarantees for vendor finance, and consider a government-backed finance facility.
- Invest in awareness and education. Provide funding to build capacity among founders, accountants, lawyers, and banks. Partner with Employee Ownership Australia and the Business Council of Co-operatives and Mutuals.
- Recognise succession as national economic policy. Treat SME continuity as critical infrastructure for jobs, productivity, and regional economies.
Call to Action
The UK acted in 2014. Canada acted in 2023. New Zealand has not acted and is experiencing fragmented outcomes.
Australia now faces a choice. It can legislate an EOT regime, provide targeted tax relief, and support succession financing, thereby protecting continuity and spreading ownership. Or it can leave thousands of businesses exposed to closure, consolidation, or foreign acquisition.
This is not simply about private deals. It is about safeguarding Australian jobs, communities, and enterprise for the decades ahead.
Next Chapter: The Blue Harbour Succession Framework
This will bring together the lessons of the guide into a practical approach, showing how Blue Harbour helps founders and management teams design, finance, and sustain successful transitions.