Prime Minister Anthony Albanese has announced 'generous' capital gains tax (CGT) exemptions for small businesses, startups, and testamentary trusts, following weeks of criticism over Labor's proposed tax reforms. The concessions aim to address backlash from industry groups and the opposition, who have labeled the changes a 'tax on growth.'
Key Changes Announced
The proposed changes include: small businesses with annual turnover up to $10 million will be eligible for existing CGT exemptions, including an extra 50% discount, up from the current $2 million threshold. Founders of 'genuinely innovative' startups with low or zero cost bases, along with early investors and employees paid in shares, can retain the existing 50% flat CGT discount. Testamentary trusts managing income for beneficiaries from deceased estates will be exempt from the proposed 30% minimum tax rate on discretionary trusts.
Government's Stance
Treasurer Jim Chalmers stated that the planned changes would cost the budget an estimated $475 million over the forward estimates, but noted that the negative gearing, capital gains, and trust changes are expected to raise about $8.1 billion overall. He emphasized that the increase in the turnover eligibility threshold aligns with how small businesses are defined elsewhere in the system, and that the government is leaving four existing concessions in place while making one broader and more generous.
Reactions from Business Groups and Opposition
Despite the announcements, the Australian Chamber of Commerce and Industry's CEO Andrew McKellar branded the concessions a 'rushed patch-up job,' while the Council of Small Business Organisations Australia welcomed the new threshold but remained concerned about wider reform impacts on investment and productivity. The Coalition remains opposed, with opposition leader Angus Taylor urging the government to scrap the bill entirely, arguing that the new $10 million threshold still disincentivizes business growth.
Greens' Position
Greens leader Larissa Waters expressed satisfaction that the government would relent on some 'blank cheque' powers but said the party is not yet prepared to support the legislation, setting up tense negotiations. Waters criticized the government for 'tinkering around the edges' instead of tackling the housing crisis.
Next Steps
Treasury has released a consultation paper on the innovative business CGT concession, inviting feedback over three weeks, and the government will consult further on the testamentary trust carve-out. The fate of the legislation hinges on a deal with the Greens, as parliament returns on Monday before the winter break on 2 July.
