Employee Ownership Trusts: The Succession Solution Australia Can’t Afford to Ignore
As Australia faces the largest intergenerational transfer of business ownership in its history, a critical question looms: how will small and medium-sized enterprises (SMEs) navigate succession as baby boomer founders retire? SMEs account for nearly 98% of all businesses in Australia and employ millions. Without effective succession planning, many risk closure or sale to offshore buyers, eroding local jobs and community wealth.
One proven solution is staring us in the face: Employee Ownership Trusts (EOTs). This model, pioneered in the United Kingdom following the landmark Nuttall Review of Employee Ownership in 2012, has transformed business succession overseas. Since its introduction into UK law in 2014, the EOT regime has driven explosive growth in employee-owned firms—from around 150 businesses in 2014 to more than 2,400 today, with one new EOT conversion occurring almost every day 1.
Graeme Nuttall OBE, author of the UK report and architect of the EOT model, explains its appeal:
“Selling to the trustee of an EOT avoids sharing trade secrets with competitors and gives control over timing. It secures legacy, independence, and ethos while rewarding and incentivising those who make a company successful—its employees.”2
He adds:
“Employee ownership is not a panacea, but for many firms it is a transformative route that challenges conventional wisdom and can trigger fundamental enhancements to productivity, resilience and decision-making.”3
The UK model works because it is simple, tax-efficient, and preserves business integrity. Vendors receive capital gains tax relief when selling a controlling interest to an EOT, and employees can receive annual tax-free bonuses. These incentives have made EOTs the dominant form of employee ownership in Britain, delivering measurable benefits: higher productivity, stronger resilience during economic shocks, and improved employee engagement 2.
Globally, the momentum is undeniable. Canada legislated for EOTs in 2023, and other jurisdictions—including the US and parts of Europe—are adopting similar frameworks. Yet Australia lags behind. Despite advocacy from Employee Ownership Australia and international experts, our government has not introduced comparable legislation. A petition currently before the House of Representatives calls for Treasury to support EOTs and issue tax guidelines, but progress has been slow 4.
Professor Andrew Pendleton, a leading academic at UNSW and long-time researcher on employee ownership, warns:
“Employee ownership is not just about fairness—it’s about economic dynamism. Evidence shows employee-owned firms outperform peers on productivity and resilience. Australia risks missing a once-in-a-generation opportunity to embed this model into our economy.”5
The question remains: why the hesitation? The EOT model poses no threat to tax integrity. It is straightforward to implement and has been adapted successfully for other common law jurisdictions. For SMEs grappling with succession, EOTs offer a pathway that safeguards jobs, preserves culture, and keeps ownership local.
With baby boomer succession accelerating, the time for action is now. If Australia fails to legislate for EOTs, we risk watching thousands of businesses disappear—or worse, fall into foreign hands—when a proven, inclusive alternative is readily available.
For more on this topic, check out our Submission to House of Representatives on Petition EN7712 entitled “ATO to provide Tax Guidelines for Employee Owned Trusts” and calling for the introduction of legislation to support and develop Employee Ownership Trusts (EOTs) in Australia (November, 2025) on our “Reports Web-Page” .
