Business Tax Relief
Albanese Government Softens Capital Gains Tax Reforms for Small Businesses and Startups
Anonymous
Key Points
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The government framed the backdowns as a way to “clear the barnacles” from the legislation, aiming to push amended tax changes through the Senate in the “next fortnight.”
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For the startup carve-out, a wider eligibility window was specified: the “indexation-based”/alternative approach would apply if the company is less than 10 years old, or up to 15 years in the biotech and medtech sectors, as long as shares are held at least five years.
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Treasurer Jim Chalmers said the revised steps were meant to provide “more clarity and confidence to investors,” along with “more support for small businesses and more incentives for innovation.”
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A discussion paper on the startup changes was released and opened for feedback until July 10, indicating parts of the incentive package were still under consultation.
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One cited driver of the reversal was economic uncertainty and political competition—specifically “competition from One Nation,” alongside broader uncertainty—according to Australian correspondent Murray Olds.
The Albanese government has made sweeping concessions to its capital gains tax overhaul, raising the small-business eligibility threshold fivefold and scrapping a planned "death tax" on trusts. Prime Minister Anthony Albanese and Treasurer Jim Chalmers announced the changes on June 18 at a Sydney press conference, after polling showed One Nation surging to 32% primary vote — ahead of Labor's 28.5% Roy Morgan.
The biggest change lifts the annual turnover limit for the 50% capital gains tax discount from $2 million to $10 million. That expands access to roughly 2.7 million small businesses — about 98% of all active businesses in Australia, according to the Prime Minister's Office.
Five Key Changes in the Government's Backdown
The government dropped four significant elements of its original plan. First, the turnover threshold rose from $2 million to $10 million. Second, a 30% minimum tax on certain discretionary testamentary trust payouts — widely called a "death tax" — was scrapped. That change affects around 10,000 trusts, according to The Guardian. Third, startup founders and investors got a new choice between the 50% discount and an indexation-based approach.
Treasurer Jim Chalmers said the steps were "all about providing more clarity and confidence to investors, more support for small businesses and more incentives for innovation." The broader reform still aims to raise $8.1 billion — the concessions cost an estimated $475 million over the forward estimates, The Guardian reported.
Startup Carve-Out Gives Founders a Choice at Tax Time
Under the new startup rules, founders, early employees and investors can choose between two options when they sell shares. They can take the existing 50% CGT discount, or use a new inflation-indexed approach that taxes only "real" gains. To qualify, the company must be less than 10 years old — or up to 15 years for biotech and medtech firms — and shares must be held for at least five years. The company's turnover must also be under $50 million.
The 15-year window for biotech acknowledges that health innovations often take over a decade to reach a sale. AusBiotech CEO Rebekah Cassidy welcomed the recognition of those long timelines, according to LCANews. A discussion paper on the startup changes was released for public feedback, with a deadline of July 10 — meaning parts of the package are still being finalised.
One Nation Surge Drove the Policy Retreat
Analysts and commentators were blunt about what pushed the government to act. Australian correspondent Murray Olds linked the reversal directly to "economic uncertainty and competition from One Nation," Sky News Australia reported. The One Nation surge — from single digits to 32% primary vote in a Roy Morgan snap poll — came days after the May 12 budget dropped.
Shadow Treasurer Angus Taylor called the reversal a sign of a "budget in tatters," saying "the government simply got it wrong from the start," according to The Australian. The Greens said the concessions helped but that the bill still had "a way to go" before they would back it in the Senate.
Senate Vote Targeted for the Next Two Weeks
The government wants to pass the amended bill — the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 — through the Senate within "the next fortnight." That sets a target of around July 2, exactly one year before the new rules are due to take effect on July 1, 2027. Officials used the phrase "clear the barnacles" to describe removing the most controversial elements to smooth the bill's path.
The National Farmers' Federation called the $10 million threshold a "meaningful result" that protects 99% of farm businesses, LCANews reported. But the Australian Chamber of Commerce and Industry remained skeptical, calling the carve-outs a "rushed patch-up job" that fails to fix the deeper barriers to investment.
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