Money in a company has already been taxed at the company rate. To use it as equity in your own name, you generally take it out as a franked dividend. The dividend is assessable to you, with a franking credit, but if your marginal rate is above the company rate, top-up tax reduces the cash available to invest.

Because of dividend imputation, the income side of the choice is close to neutral. Over the life of a profitable business, money returned to you as interest and money returned as a franked dividend end up in a similar place once the franking credit is counted. So the decision is not about the income you draw. It is about the capital: how much you can put in, how cleanly you get it back, and where the growth is taxed.

Your company earns $1,000. If it is a base rate entity taxed at 25%, it keeps $750. If it is taxed at 30%, it keeps $700.

Lend that amount to the new business and the whole $700 or $750 goes to work.

Pay it to yourself first to invest as personal equity, and you take it as a fully franked dividend. At the top marginal rate, the amount left after personal tax is roughly $530 either way, because the company rate washes out under imputation. So the loan puts about $700 to $750 to work, rather than about $530. The gap is largest at the top rate and narrows if you are taxed at a lower rate.

Be clear about what this is. The personal tax is deferred, not removed. The money still belongs to your company. But you deploy more capital now, and you choose if and when the personal layer is ever paid.

Division 7A stops you using company money for your personal benefit without it being taxed as a dividend. That is why equity in your own name must be funded from after-tax dollars.

A loan is different. If the new company repays the lending company, that is repayment of debt, not a dividend to the founder. Payments or loans from a private company to another company are generally outside Division 7A under section 109K, except where the recipient company acts as trustee. The interposed entity rules can still apply if the arrangement passes value through to a shareholder or associate, so do not use the new company as a conduit to move money to an individual.

From 1 July 2027, the Government proposes to replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation for assets held more than 12 months, plus a 30% minimum tax on the net capital gain. It was announced in the 2026-27 Federal Budget on 12 May 2026, introduced into Parliament on 28 May 2026, and is not yet law.

The transition works in three parts. Assets sold before 1 July 2027 keep the current treatment and the full 50% discount. Assets acquired from 1 July 2027 fall fully under the new regime. For post-CGT assets that currently qualify for the discount, assets acquired before 1 July 2027 but sold after that date are effectively split: the current rules apply to gains accruing up to 1 July 2027, and the new indexation and minimum-tax regime applies to gains accruing after that date, using either a market valuation at 1 July 2027 or an approved apportionment method.

For a business you start today and sell after 1 July 2027, most of the gain will fall under the new regime, so plan the exit on that basis rather than the old discount. The four small business CGT concessions are retained, and the Government is consulting on how the reforms interact with early-stage and start-up investment incentives. Superannuation funds are not affected and keep their existing CGT treatment for assets they hold directly.

If you hold the shares through a discretionary trust, note the separate proposal for a 30% minimum tax on discretionary trusts from 1 July 2028, subject to exceptions and transitional rules. This affects how a trust shareholder is taxed and should be factored into the structure.