(AUSTRALIA) – Australia’s government is expanding the small-business CGT concession threshold to $10 million, introducing a startup carve-out for founders and early investors, and reviewing the discount and trust taxation rules, a package meant to aid innovation and soften taxes on exits.

Labor says the main shift is simple. A business that turns over more than $2 million but less than $10 million would move inside the concession settings now reserved for smaller firms. That includes a broader reach for the 50% active asset reduction, a rule that can cut the taxable capital gain on eligible business assets.

Jim Chalmers paired that expansion with a second promise aimed at startups. Founders, early-stage investors, and employees paid partly in shares would get a separate concession, though the exact design still sits in consultation. That matters because startup gains often arise from equity, not from the sale of a mature trading business.

Another change sits behind the political fight. Labor is consulting on replacing the current 50% capital gains discount with an inflation-indexed cost base, which would let the purchase price rise with inflation before tax is calculated. That approach may help long-held assets in high-inflation periods, but it would not work the same way for every taxpayer.

Trust taxation is also being pulled back from an earlier, sharper proposal. The Australian government is moving to narrow or drop parts of the proposed 30% minimum tax for discretionary testamentary trusts, after criticism that the measure would hit estates and family wealth transfers too broadly.

Taken together, the package redraws the tax treatment of exits in Australia. Startups, established small businesses, early investors, and families using testamentary trusts may all face different tax results if the plan becomes law.

The first part of the package expands an existing concession rather than creating a new one from scratch. Under the current rule, the turnover cap for the small-business capital gains tax concession sits at $2 million. Labor proposes lifting that cap to $10 million, widening access to the concession for a much larger group of private businesses.

That expansion may matter most for firms that are plainly operating businesses but have outgrown the old ceiling. A company with steady revenue above $2 million can still be modest by Australian standards. Pushing the threshold to $10 million would pull many of those firms into concession territory at the point of sale.

Startups sit in a different position. Many have low turnover but high paper value, and many reward staff with equity instead of cash. Labor’s proposed startup carve-out is meant to deal with that mismatch, especially where founders or ESOP holders face tax settings built around conventional businesses rather than venture-backed ones.

Consultation will decide the fine print. That includes who qualifies as a startup, how long shares must be held, whether relief applies on share sales, and how any concession would interact with existing employee share scheme rules. Those choices may decide whether the measure mainly helps founders at exit, early investors at disposal, or staff holding options and shares.

Dates matter because tax outcomes can turn on the sale date, the issue date for shares, and any transition rule written into legislation. Labor has flagged consultation and policy intent, but the effective date for each element will depend on the final bill. In many cases, taxpayers would need to match transaction timing to the enacted start date rather than the announcement date.

Different groups would feel these changes in different ways. Founders of growing companies may gain from the startup carve-out if it lowers the effective tax hit on equity sold after years of building value. Early-stage investors may also benefit if the final design treats startup holdings more favourably than standard CGT rules do now.

ESOP recipients sit in a more delicate position. Startup employees often accept lower cash pay in exchange for options or shares. A carve-out that covers them could improve the after-tax value of that trade. If the final rules are narrow, however, employees may still face a tax result that differs sharply from the treatment of cash wages or gains on other assets.

Owners of more established businesses may look first at the turnover threshold. A firm with turnover between $2 million and $10 million may not fit the startup story at all, yet still gain access to the small-business capital gains tax concession through the broader cap and the wider reach of the 50% active asset reduction.

The proposed change to the CGT discount raises a separate issue. Today’s 50% discount cuts the taxable gain by half for eligible assets. An inflation-indexed cost base would work differently. Instead of an automatic halving, the purchase cost would rise with inflation before the gain is calculated.

That swap may help assets held for long periods during higher inflation. It may help less where inflation is low or where the gain comes mostly from rapid growth rather than the erosion of money’s value. Startups and established businesses may therefore see different effects. A fast-growing startup exit may prefer a straight discount, while a long-held asset with slower nominal growth may fare better under indexation. The final design will decide that balance.

Changes to testamentary trusts have drawn a separate audience into the tax debate. A testamentary trust is generally created under a will and used after death to hold or distribute assets. The earlier proposal for a 30% minimum tax on discretionary testamentary trusts drew criticism because it raised the prospect of higher tax inside ordinary estate planning structures.

Labor’s move to narrow or drop parts of that proposal lowers some immediate pressure on estates, though families should still wait for the final text before assuming the old settings remain untouched. Estate planning in Australia often relies on trust flexibility, and even a narrower rule may alter how wills, distributions, and beneficiary arrangements are drafted.

Cross-border founders and remote-work startups also have a stake, though this is a tax package, not a visa measure. A founder living between countries, or an ESOP holder working remotely for an Australian startup, may need to track how Australian capital gains rules interact with residency, share ownership, and foreign tax treatment. Those questions usually need individual advice.

Business owners, founders, investors, and trustees may want draft modelling before any sale, restructure, or estate plan change. The package reaches into exits, equity compensation, and inheritance structures at the same time. This article discusses tax policy changes and readers should seek professional tax advice for Australia-specific guidance.