Key facts
- All 2.7 million Australian small businesses will receive capital gains tax exemptions.
- Startups and testamentary trusts are included in the CGT reform carve-outs.
- The annual turnover threshold for small business CGT concessions will rise to $10 million.
- The changes are expected to cost the budget $475 million over the forward estimates.
- Testamentary trusts will be exempt from the 30% minimum tax on discretionary trusts.
Australian Prime Minister Anthony Albanese announced that all 2.7 million small businesses in the country will receive exemptions from capital gains tax (CGT) as part of revised tax reforms. This move comes after significant backlash from industry groups who criticized the government's initial proposal to shift from a flat 50% CGT discount to an inflation-linked approach, calling it a 'tax on growth'.
The government will increase the annual turnover threshold for small businesses to qualify for CGT concessions to $10 million, aligning it with other small business definitions. Treasurer Jim Chalmers stated that these amendments will ensure 98% of active businesses receive CGT concessions, leaving four existing concessions in place while making one substantially broader and more generous. These changes are projected to cost the budget $475 million over the forward estimates, a fraction of the $8.1 billion expected to be raised from broader negative gearing, capital gains, and trust reforms.
Additionally, testamentary trusts, which manage assets from deceased estates, will be exempted from the proposed 30% minimum tax on discretionary trusts. Chalmers indicated that further details on these trust carve-outs will be provided in a forthcoming consultation paper, and these amendments will not be part of the initial legislation submitted to the Senate.