After weeks of backlash, the federal government has widened CGT concessions and trimmed its own tax powers.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers have announced sweeping capital gains tax carve‑outs for small businesses and start‑ups, marking a major change from the original investor tax overhaul.
Standing alongside Chalmers at a Sydney press conference, Albanese said that the turnover threshold for the small business 50 per cent active asset CGT concession would jump fivefold from $2 million to $10 million.
“Today we’re announcing that we will increase the turnover threshold for existing small business 50 per cent active asset CGT concession from $2 million to $10 million. This is one of the four concessions that we have said would continue,” he said.
“It is the most widely used of those four CGT concessions used by small businesses in Australia. A total of 2.7 million existing active small businesses will be eligible for this concession.”
He reiterated that the higher cap was designed to bring the CGT rules into line with other definitions of small business across the tax system.
At present, businesses with annual turnover below $2 million or net assets under $6 million can access a suite of CGT concessions, including the 50 per cent active asset reduction, when owners sell.
Budget cost modest, coverage near‑universal, Chalmers says
Chalmers underlined both the breadth of the carve‑outs and their limited impact on the fiscal bottom line and said the carve-outs would reduce revenue by $475 million over the next four years.
He said that the higher cap for the small business concession meant 98 per cent of all active businesses would be eligible for capital‑gains tax relief.
“This now means that every one of the 2.7 million active businesses in this country will have access to generous CGT concessions,” he said.
“There are four existing concessions for businesses in the CGT system. We’re leaving all four in place, but we are making one of them substantially broader and significantly more generous at the same time.”
Business and investor groups have said that the government’s changes to investor tax settings could dampen asset values and investment appetite.
New start‑up concession and tech‑sector carve‑outs
Albanese also used the press conference to flag a new concession targeted at high‑growth companies and the tech sector.
The Prime Minister said Treasury would design a fresh tax break specifically for innovative firms, stating the government would propose a “new innovative business tax concession” for start‑ups.
“We’ll release the consultation paper on the start-up sector later this morning,” he said.
Chalmers also said that this consultation paper would detail CGT carve‑outs for the start‑up sector, setting the stage for further discussions with founders and business groups.
Testamentary trusts carved out of minimum tax
Another policy shift announced was the decision to exclude discretionary testamentary trusts from the new minimum tax, provided they are established for legitimate estate‑planning reasons.
Those structures – of which there are about 10,500 in Australia – are only activated on death and allow the income from inherited assets to be streamed across beneficiaries over time.
“Today, we’re confirming the government will exempt income from all types of discretionary testamentary trusts from the minimum tax, provided they are established for genuine testamentary purposes,” Albanese said.
New build definition to be added to bill
Chalmers further said that wide‑ranging ministerial powers embedded in the draft law would be scaled back, with the bill handing the Treasurer nine separate discretions, including the ability to decide which assets retain CGT discounts and how “new builds” would be defined for negative gearing and concession purposes.
He said the government would now remove discretionary powers “we no longer need to give effect to the policy intent”, with Chalmers adding that the explicit definition of “new builds” would now be written directly into the act.
This could be significant for property investors and lenders alike, given the bill restricts negative gearing to new dwellings and will require clarity around what qualifies as a new home.
Legislation faces tight parliamentary schedule
The concessions come after the first tranche of the CGT and negative gearing package faced a fast‑tracked Senate economics legislation committee inquiry, which held hearings on 15 and 16 June.
No broker groups were called, yet submissions from the Mortgage & Finance Association of Australia and the Australian Finance Industry Association said that the changes could undercut how borrowers build deposits and that several core concepts were still undefined.
Labor wants the bill through the upper house by 2 July, ahead of the winter recess.
Albanese rejects claim changes are about backlash
Pressed on whether the carve‑outs were motivated by growing backlash against the reforms, Albanese said the changes remained intact and that his caucus was supportive of the policy.
He dodged the suggestion that the new concessions were designed to “quell the backlash” and said: “Our ranks are very supportive of this reform.”
He then broadened the frame back to the housing and intergenerational equity narrative that underpins the entire package.
“I haven’t seen any article by any serious commentator saying the housing system is working for Australians, that it is easier today to get into a home than it was when I first bought a home a long time ago, now 35 years ago. So we are making changes that are important, and what we’re doing is giving the implementation details as we flagged on budget night,” he said.
[Related: AFIA calls for redesign of investor tax overhaul]
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