The Government has announced more small businesses will be able to access a 50% capital gains tax (CGT) discount.
It comes after its broader CGT changes, announced in the federal budget, sparked backlash from business and startup groups.
Treasurer Jim Chalmers said the move means 98% of all active businesses will now be eligible for CGT concessions.
The Government also proposed a new tax concession for startup investors, and exempted certain trusts from a 30% minimum tax.
What is CGT?
CGT applies to the profit from the sale of an investment, including property and
shares in a company.
Since 1999, if you held an investment for more than 12 months, you only paid tax on half the profit when you sold it.
This year’s federal budget announced that, from July 2027, the flat 50% discount is gone.
Instead, your original purchase price will be adjusted to account for inflation. You’ll only pay tax on the gain above that inflation-adjusted figure. No matter what, you’ll always pay a minimum tax rate of 30%.
For example, under the new rules, if you bought shares for $100,000 and inflation over time pushed that value to $120,000, you’d only pay tax on gains above $120,000.
The Government introduced a bill including this change to Parliament on 28 May.
It said it would consult separately with small businesses and startups before legislating further changes.
Backlash
Business groups, founders and accounting bodies pushed back following the announcement.
Accounting body CPA’s tax lead Jenny Wong said it was wrong to introduce major tax changes “before properly engaging with affected stakeholders.”
Startup founders launched an open letter to the Government, warning the changes would make Australia less attractive for building companies and attracting investment.
Small businesses
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Today, Prime Minister Anthony Albanese and Chalmers announced a series of changes to how the CGT reforms will apply to small businesses.
Businesses earning up to $10 million a year will now be eligible for a 50% CGT discount when selling business assets. Previously, only businesses earning under $2 million a year qualified.
Chalmers said all 2.7 million active small businesses will now have access to “generous” CGT concessions.
Startups
A consultation paper released today proposes a new 50% CGT discount for early-stage investors.
That includes founders and employees who are given access to shares in “innovative” startup businesses.
Chalmers said the change was about backing Australian startups and providing “ a bit more clarity and confidence to investors”.
Trusts
After the budget, the Government faced criticism over the treatment of testamentary trusts: funds set up through a person’s will to distribute their estate to family.
The Opposition labelled the policy a “death tax” and called for the trusts to be exempt. The Government has now confirmed the exemption.
Income from all types of testamentary trusts will be exempt from the 30% minimum tax, where established for genuine inheritance purposes.
Albanese clarified there is “no tax on inheritances or deceased estates”.
What’s next?
The Government will try to amend its bill currently before the Senate to implement the small business threshold change.
The startup concession and trust exemption require further consultation and will be introduced in later bills.
Labor has a majority in the lower house, so the bill will pass there. It will need the Greens, the Opposition, or crossbenchers to pass the Senate.
