Lead

Small business owners are urging Australia's Labor government to reconsider not just the eligibility thresholds for capital gains tax (CGT) concessions, but the design of the entire reform package, with one Indigenous startup founder saying the proposed changes would "handcuff" his company's ability to grow.

The federal government has left the door open to updating the definition of a small business for CGT purposes, which could make more companies eligible for four existing CGT concessions. But business groups argue this would only be "one step" of many needed, and are pushing for broader and simpler carve-outs — or a pause on the changes altogether.

Coverage Comparison

Two reports by ABC Australia, the public broadcaster, captured the debate from different angles. One report focused on the concerns of individual business owners, including an Indigenous startup founder, and the perceived inadequacy of the government's response. The other highlighted the government's acknowledgment of small business concerns and the ongoing consultation process.

Both reports agree on the core facts: the current CGT small business thresholds, the government's willingness to consult, and the planned sequencing of legislation.

Key Claims

According to both reports, a small business for CGT purposes currently must have a turnover of up to $2 million and net assets of up to $6 million. In contrast, for other tax purposes, the thresholds are $10 million and $12 million respectively.

About 91 per cent of Australia's 2.7 million small businesses can access at least one of the four CGT concessions and exemptions. An estimated 200,000 additional small businesses would become eligible if the turnover threshold for CGT purposes were lifted to $10 million.

The four CGT concessions include a full exemption for business owners aged 55 and over selling their business after more than 15 years to retire, and a 50 per cent CGT reduction that applies after the standard deduction upon the sale of "active" assets used in running the company.

Lane Stockton, founder and CEO of Yarn'n, a self-funded Brisbane-based startup that manufactures toilet paper and directs 50 per cent of profits to educating Indigenous children, told ABC Australia the CGT change would "handcuff" his company's growth. Stockton, a 31-year-old Aboriginal man and former builder, launched the company in 2023 and currently supports the high school education of four First Nations students from remote Australia.

Government's Position

Prime Minister Anthony Albanese said Thursday the government was "engaging in good faith" in consultations with businesses seeking broad carve-outs or adjustments to the proposed tax package. He warned Australians not to expect "big changes" to the current proposal.

Treasurer Jim Chalmers, in a separate report, acknowledged the concerns were "legitimate" and said he was "aware" that issues go beyond startups. "There are legitimate issues when it comes to startups, there's a legitimate conversation going on with the small business sector," he said.

Chalmers did not rule out extending CGT carve-outs for small business, but stressed the importance of applying the changes "broadly" to avoid introducing further "distortions" into the economy. He said he would not "pre-empt" the consultation by indicating whether carve-outs would be restricted to specific industries, like tech, or based on common startup characteristics.

Business Groups' Push

Small business groups want the federal government to lift the thresholds for CGT concessions to companies with an annual turnover of up to $10 million and net capital assets under $12 million. They argue the current definition is out of step with modern business realities and that the concessions should be simplified and broadened.

Some groups are calling for the changes to be put on hold until more substantial reforms to boost investment and productivity can be brought forward. However, Labor is resisting such delays, insisting the reforms to the CGT discount are necessary.

Legislative Timeline

According to one report, Labor plans to first legislate replacing the 50 per cent CGT discount with a reduction tied to inflation, and will then finalise narrow carve-outs for businesses disproportionately impacted by the proposal. The government is consulting on a second tranche of legislation expected to include "implementation detail" like carve-outs for some startups, such as those in the tech sector.

The government remains on track to legislate its CGT, negative gearing, and income tax budget measures before parliament rises for the winter break in July, according to the report.

The Board of Taxation had recommended lifting the CGT small business threshold to $10 million in 2019, as reported by one of the sources.