The Albanese Government on 18 June 2026 announced an increase to the turnover threshold for the existing 50 per cent active asset capital gains tax concession, lifting the ceiling from $2 million to $10 million, bringing 2.7 million active small businesses — 98 per cent of all active businesses in Australia — into eligibility.

The reform has two distinct components. For established small businesses, the expanded threshold means owners selling qualifying active assets, including the business itself, can access the 50 per cent CGT discount on top of the standard individual discount, potentially reducing or eliminating tax on realised capital gains. Separately, innovative startups will gain access to the existing 50 per cent capital gains discount — a carve-out designed to address the structural mismatch between equity-heavy compensation in early-stage companies and the tax treatment of those gains at exit.

These measures sit within a broader sequenced tax agenda. The Prime Minister's office confirmed in May 2026 that the CGT cuts are part of twin tax reforms legislated for 2026 and 2027. From 1 July 2026, a permanent two-year loss carry-back for companies with turnover up to $1 billion also takes effect, per Treasury's May 2026 announcement. Then, from 1 July 2027, the flat 50 per cent CGT discount will be replaced by an inflation-indexed discount — a structural shift away from a fixed-rate concession toward one calibrated to real economic gain.

The move to an inflation-based discount is the more architecturally significant change, even if the threshold expansion draws more immediate attention. The current 50 per cent discount, unchanged since its introduction in 1999, applies uniformly regardless of holding period or inflationary erosion. Tying the discount to CPI movement aligns Australian CGT treatment more closely with a principle — that only real, inflation-adjusted gains should be taxed — that tax economists have argued for decades. The practical effect for long-held assets will depend on prevailing inflation rates between acquisition and disposal; in a low-inflation environment, the new discount could be less generous than 50 per cent, though Treasury has signalled it will consult on the design before implementation.

That consultation commitment was flagged explicitly. The government confirmed its intention to consult on CGT exemptions and concessions in a May 2026 address to the Australian Business Economists, indicating the 2027 framework is not yet fully legislated in its detail. For practitioners advising clients on business succession or exit planning, that leaves meaningful uncertainty over the precise discount formula, the definition of an "innovative startup" for purposes of the new carve-out, and how the active asset test will be applied at the new $10 million threshold.

The threshold lift itself is a durable ask from small business advocates. The $2 million cap had not been indexed since the small business CGT concessions were consolidated under the Tax Laws Amendment (Small Business) Act 2007 and had steadily eroded in real terms as business valuations rose. A $10 million ceiling is broadly consistent with the ATO's existing small business entity threshold for income tax purposes, which removes a long-standing asymmetry between the two regimes.

For startups, the concession is more targeted. Access to the 50 per cent discount — rather than the active asset concession structure — reflects that many early-stage companies hold intellectual property and equity stakes rather than physical active assets, and may not meet the existing active asset test. The design detail on what constitutes an "innovative" startup for eligibility purposes will be critical; without a precise statutory definition, the boundary is a compliance and litigation risk.

The loss carry-back provision, effective from 1 July 2026, extends to companies up to $1 billion in turnover — well above the small business tier — and is permanent rather than time-limited, unlike the temporary COVID-era version. For mid-market companies cycling through investment phases, the ability to offset current-year losses against profits from the prior two years smooths the tax liability curve without requiring immediate revenue neutrality.

Taken together, the package represents a material reconfiguration of how capital gains are taxed at the point of business exit in Australia, with the inflation-linked discount scheduled for 2027 carrying the most lasting structural consequence.