Albanese Confirms Start-Up and Small Business Carve-Outs in CGT Overhaul
Synopsis
The Albanese government has introduced sweeping capital gains tax reforms into parliament despite mounting criticism from investors, business groups and state premiers. The proposed changes would replace Australia’s 50% capital gains tax discount with an inflation-based system from July 2027 while limiting negative gearing to new property builds. Treasurer Jim Chalmers confirmed the government is considering carve-outs for startups and small businesses as concerns grow over the potential impact on investment and entrepreneurship. The legislation also includes new worker tax offsets and instant deductions as Labor attempts to balance housing affordability reforms with broader economic incentives.
The Albanese government has put controversial reforms to capital gains tax before parliament, which more clearly leave the door open to carve-outs to its definition of small business and startups.
Key Highlights
- Anthony Albanese presses on with sweeping changes to capital gains tax
- Plan is 50% CGT discount to be replaced by an inflation-based system
- Negative gearing will be restricted to new builds as of 2027
- Carve-outs for start-ups and small firms are still being considered
- The NSW and WA premiers have expressed reservations about the reforms
- Included in the package are new worker tax offsets and instant deductions.
The Albanese government introduces major tax reform packages
The Australian government has put its first major tax reform package into Parliament with some controversial changes, pushing ahead with some controversial changes in capital gains tax and negative gearing despite political backlash. As the legislation was introduced in Parliament, Treasurer Jim Chalmers described the reforms as the first step in the most ambitious package in a quarter of a century.
The second, most consequential and detailed measure is to ensure that the existing 50% capital gains tax discount will be replaced, for those capital gains accrued on or after 1 July 2027 with a new inflation-linked system. It will also put an end to negative gearing in each financial year, for new builds on residential property investments starting in the 2027–28 financial year, existing investments made prior to it being abolished via a grandfathering horizon of May 12, 2026. These are the details of your tax cuts: $250 up to the new Working Australians Tax Offset, a one-off annual payment, and a one-time instant deduction of $1000 from 2026–27.
Small business carve-outs are still being negotiated
Faced criticism from investors, business groups and even startup founders, the government confirmed it is examining small business and startup carve-outs. Chalmers said fears from those sectors were legitimate, especially how the framework would apply to inflation-adjusted cost bases and enforced interpretation rules under existing concessions.
One proposal under consideration would change the eligibility limit for current CGT exemptions from businesses with revenue of $2 million to companies that earn up to $10 million. Treasurer said the government would be continuing its dialogue with stakeholders and that implementation of further legislation could follow consultation including on investment structures for startups and existing small business tax concessions.
Concerns over reforms raised by Premiers and Investors
State leaders have also warned that our ability to impact investment, housing supply and other areas of economic activity could be negatively affected, with NSW Premier Chris Minns and WA Premier Roger Cook both raising the issue earlier last week. A study commissioned by the government rejected the idea that allowing foreign investors to buy freehold land would remove cash from shares, start-ups and property, but raised uncertainties for investors and entrepreneurs.
The reforms, according to the government, are intended to boost housing affordability and create a fairer tax system for workers and first-home buyers. Investors in new property development would have the choice between the 50% capital gains discount (status quo) and the inflation-based method, while those on welfare payments including Age Pension and JobSeeker recipients would not be subjected to the proposed minimum 30% tax rate on capital gain.
FAQs
- How is capital gains tax changed?
The government intends to replace the 50% CGT discount with an inflation benchmark discount by July 2027.
- Will existing investments be affected?
Under grandfathering arrangements, existing investments will before hand be for the most part safeguarded.
- What are the new tax benefits included?
The tax benefits include instant tax deduction of up to $1000.
Follow Inspirepreneur Magazine for daily global business news
At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
