The Federal Government's proposed changes to Capital Gains Tax (CGT) continue to generate discussion, particularly among Australia's start-up and small business community.
As part of the 2026–27 Federal Budget, Treasurer Jim Chalmers has introduced legislation that would significantly change how capital gains are taxed. Under the proposal, the current 50% CGT discount would be removed and replaced with a system that taxes only the "real" gain made on an asset after inflation is taken into account.
The Government believes the changes will create a fairer tax system by bringing the taxation of capital gains more closely in line with the taxation of wages and salaries.
However, concerns have been raised by many business groups, particularly for founders who build businesses from the ground up. For start-ups and small businesses that begin with very little initial capital investment, a sale of the business can result in substantial gains being realised. Under the proposed model, those gains could potentially attract higher tax liabilities than under the current rules.
Many industry representatives have argued that this could discourage entrepreneurship, innovation and investment by reducing the financial rewards associated with building and growing a successful business.
In response to these concerns, the Government has confirmed that consultations are currently taking place with business stakeholders. Treasurer Chalmers has indicated that discussions are specifically focusing on the treatment of small businesses and start-ups where a business has been built from a low or zero cost base.
While no exemptions or concessions have been announced at this stage, the consultation process suggests the Government is considering how the proposed reforms may impact founders and business owners differently from investors in property, shares and other assets.
Treasurer Chalmers has indicated that where changes or exemptions are considered appropriate, the finer details will be addressed through future legislation following the consultation process.
At this stage, it remains unclear what the Government considers to be a "low" cost base. However, the Treasurer's comments suggest that businesses established with significant assets or capital investment may not qualify for any potential concessions under the proposed framework.
The discussion also extends beyond the new CGT measures. Minister for Small Business Anne Aly has confirmed the Government is open to considering reasonable concerns about the existing small business CGT concessions and whether the eligibility thresholds — largely unchanged since 2007 — remain suitable in today's business environment.
Industry groups, including the Council of Small Business Organisations Australia (COSBOA), have argued that these long-standing thresholds no longer reflect the realities of modern small business and should be reviewed as part of the broader reform process.
In addition to Government consultations, the proposed legislation will be examined by a Senate inquiry. The broader reform package includes changes to negative gearing, a proposed $250 tax offset for working Australians, and a new instant $1,000 tax deduction for work-related expenses.
The inquiry, led by the Greens, is expected to report its findings by 22 June, with the outcome likely to play an important role in shaping the final legislation.
With significant changes still under consideration, business owners should stay informed and seek advice before making major decisions relating to business succession, restructuring or future sale plans. As always, we will continue monitoring developments and keep you updated as further details emerge.
Important: These proposed changes are not yet law. The legislation is currently subject to consultation and review, and details may change before any reforms are implemented.