What's happened
The government has expanded the active asset discount for small businesses up to $10 million in turnover and plans new allowances for start-ups, while scrapping a tax on discretionary trusts. CGT reform now targets broader entrepreneurship with a 2.7 million small-business reach, under a 30% minimum tax.
What's behind the headline?
What’s happening now
- The government is expanding the active asset discount to 2.7 million small businesses, up from a $2 million turnover cap.
- A new 30% minimum tax is introduced for real gains from CGT events after 1 July 2027, replacing part of the 50% discount for individuals, trusts, and partnerships.
- Start-ups will receive new tax concessions to encourage entrepreneurship and reduce barriers.
- The discretionary trusts tax will be scrapped.
Why it matters
- More small businesses qualify for tax relief, potentially spurring investment and hiring as owners plan for growth.
- The shift toward cost-based indexation targets real gains and aims to curb aggressive tax planning around asset sales.
- Start-up concessions could lower the upfront cost of launching new ventures, boosting innovation.
What to watch
- Transition rules and exact eligibility timing are critical for planning. Businesses will need to review asset bases and expected gains ahead of 2027.
- The impact on housing and other sectors will depend on how the new CGT rules interact with existing incentives.
How we got here
Australia is rewriting capital gains tax rules in a budget-driven move. The active asset discount is being expanded to more small businesses, with a turnover threshold rising to $10 million. The 50% CGT discount remains for pre-2027 gains, while a 30% minimum tax applies to new gains from 1 July 2027. Start-up concessions are being introduced to foster entrepreneurship, and the discretionary trusts tax is being scrapped. The changes aim to align capital gains treatment with broader business activity and to reduce distortions in small-business investment.
Our analysis
The government’s budget announcements and related ATO explanations indicate an expansion of the active asset discount and a move to a 30% minimum tax rate for CGT, with new concessions for start-ups and the elimination of the discretionary trusts tax. Tax policy commentary from official sources and financial outlets is incorporating these changes and outlining the expected coverage and transition rules.
Go deeper
- How will small businesses prepare for the expanded discount and the new minimum tax?
- Which sectors are most affected by the discretionary trusts change?
- When should businesses review asset bases in light of the 2027 transition?
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Australia - Country in Oceania
Australia, officially known as the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands.