The Albanese Government is today announcing further implementation details for its tax reform package, following an intensive first round of post-Budget consultation.
Our tax reforms are all about making it easier for Australians to buy their first home, cutting taxes for workers, and better aligning the tax treatment of labour and asset income, and this is reflected in the core legislation before the Senate.
The details we’re announcing today are all about providing more clarity and confidence to investors, more support for small businesses, and more incentives for innovation.
We are announcing further CGT concessions today for small businesses and startups, and retaining the original intent of our policies.
This means all 2.7 million active small businesses and 98 per cent of all active businesses will be eligible for generous CGT concessions.
Having completed a substantial amount of the consultation we flagged in the Budget papers, we’re now releasing a consultation paper on startups while we also provide further implementation details around our tax reforms, including:
- Announcing an increase to the turnover threshold for the existing small business 50 per cent active asset CGT reduction from $2 million to $10 million. This will mean all 2.7 million active small businesses and 98% of all active businesses will be eligible for this concession.
- Releasing a consultation paper on the design of a new Innovative Business CGT Concession that would provide a 50 per cent CGT discount to early-stage investors including founders and employee share scheme participants of innovative start-up businesses.
- Confirming that income from all types of testamentary trusts will be exempt from the minimum tax, including future discretionary testamentary trusts, with implementation details included in further consultation.
- Confirming amendments will be made to the legislation in the Senate rather than in legislative instruments, to provide certainty on as much of the implementation details of the Government’s tax reforms as possible.
These details mean the Albanese Government is now delivering over $3.8 billion in new measures that lower taxes for businesses and start-ups, on top of the fourth and fifth rounds of tax cuts for workers and a fairer housing market for first home buyers.
Small businesses concessions
As outlined in the Budget, the Government will retain the existing four small business CGT concessions which allow small businesses to reduce, defer or completely eliminate their capital gains tax liability when they sell active business assets.
We are extending the eligibility of the 50 per cent active asset reduction to more businesses by increasing the turnover threshold from $2 million to $10 million.
This brings eligibility for this concession into line with the turnover threshold for the instant asset write off and will mean that all 2.7 million active small business and 98 per cent of active businesses will be eligible for a 50 per cent CGT discount on active business assets, on top of the discount for inflation where eligible once these reforms are in place.
The Government will introduce amendments to the legislation currently before the Senate to give effect to this change.
Consultation on arrangements for innovative start-ups
The Government is today releasing a consultation paper on the design of a 50 per cent CGT discount for early-stage investors including founders and employee share scheme participants of innovative start-up businesses.
The Innovative Business CGT Concession will provide individuals, partnerships and trusts holding eligible shares a choice between a 50 per cent discount or indexation and the minimum tax for gains accrued from 1 July 2027.
Subject to further consultation, eligible shares must be new equity issued by a company that is under 10 years old (or under 15 years in certain circumstances), under $50 million in turnover and meets principles-based innovation criteria, and must be held for five years before being sold, with a lifetime cap on the concession.
This will ensure that early investors in innovative start-ups that start with a low or zero cost base still receive a significant discount on a future capital gain, supporting the continued growth of Australia’s start-up and venture capital ecosystem.
The Government will consider expanding eligibility to 15 years for start-ups in sectors such as biotech and medtech that can take longer to commercialise.
Consultation is open until 10 July and will inform the final design, to be implemented in a later tranche of tax reform legislation. The paper will be available on the Treasury website.
These measures build on the existing significant measures to support business risk taking and investment in the Budget, including two-year loss carry back, loss refundability for start-ups, expanded venture capital incentives, and making the $20,000 instant asset write off permanent.
The additional support for small business has an indicative cost of $300 million over the forward estimates and brings the total new tax measures to support businesses in the tax reform package to over $3.8 billion. The proposed arrangements for start-ups have an indicative cost of $125 million over the forward estimates. Financial impacts will be finalised in the next Budget update in the usual way, following consultation.
Amendments to the legislation
The Government will make targeted amendments to the legislation currently before the Parliament, removing ministerial powers to provide certainty on as much of the implementation details as possible.
The Government intends to move the following amendments in the next sitting fortnight, subject to parliamentary negotiations:
- Extend the eligibility of the 50 per cent active asset reduction to more businesses by increasing the turnover threshold from $2 million to $10 million.
- Ensure deductible gift and donations reduce capital gains that are subject to the minimum tax, to maintain tax incentives in relation to charitable giving.
- Provide the list of income support payments that qualify for an exemption from the minimum tax on capital gains.
- Embed the calculation method for the Working Australians Tax Offset in legislation.
- Remove ministerial powers no longer needed to give effect to the Government’s policy intent.
The Government also intends to remove ministerial discretion in relation to the following aspects of the Bill, with legislation to be introduced later this year following consultation:
- Definition of new builds that are eligible to choose a 50 per cent discount on gains accrued from 1 July 2027, and eligible to access negative gearing for properties purchased after 12 May 2026, consistent with the details outlined in the Budget.
- Definition of the types of housing investment exempt from the limits on negative gearing, including affordable housing.
The definition of new builds and housing investment exemptions will be moved into primary legislation in a future tranche of tax reform legislation. Final details, including treatment of certain types of accommodation and housing investment, will be subject to consultation.
These details reflect the targeted consultations and engagements undertaken since the release of the Budget, consistent with the Government’s commitment to engage with stakeholders on implementation.
Trusts reform and other elements of the tax reform package
The Government will continue to develop further tranches of legislation to implement the Budget tax reform package, consistent with the process for legislating other large tax reform packages in the past.
This will include the release of a consultation paper on implementation of the minimum tax on discretionary trusts in the coming weeks which will provide further details on the proposed implementation approach.
In response to targeted consultation following the Budget, the Government will exempt income from all types of discretionary testamentary trusts from the minimum tax provided they are established for genuine testamentary purposes.
The exclusion will be limited to income from assets of the deceased estate. For discretionary testamentary trusts established on or after 1 July 2028, the exclusion will only apply to trusts that can only benefit individuals and income tax exempt entities.
We have been clear that there is no tax on inheritances or deceased estates but we are taking this step to put this beyond doubt.
This exemption has an indicative cost of $50 million over the forward estimates. Financial impacts will be finalised in the next Budget update in the usual way, following consultation.
In addition, the Government will next week introduce legislation to give effect to our reforms that make loss carry back and the instant asset write off for small business permanent.
We are grateful to the individuals and organisations that have engaged with the Government on these issues in good faith since the release of the Budget and also acknowledge the work of the Senate Economics Legislation Committee and submissions made to its inquiry process.
The Albanese Labor Government’s tax reform agenda is all about making it easier for Australians to buy their first home, cutting taxes for workers, and better aligning the tax treatment of labour and asset income, and that’s the focus of the legislation we’re putting before the Parliament.
The details outlined today will provide further clarity and confidence to investors, more support for small businesses and increase incentives for innovation.