Small businesses and startups launching from nothing subject to CGT talks

Treasurer Jim Chalmers says consultation over the government’s controversial capital gains tax reform will focus on businesses and startups that grow from almost nothing, narrowing the scope of potential carveouts.

Chalmers on Thursday introduced legislation underpinning key elements of the 2026-27 federal budget, with Labor striving to pass those reforms before Parliament breaks over winter on July 2.

Central to that bill is a plan to overhaul the capital gains tax (CGT), removing the current 50% discount and installing a model that taxes ‘real’ gains over inflation when an asset is sold.

Labor says the plan would make the tax system fairer by more closely aligning the tax treatment of capital gains to the tax levelled on wages and salaries.

But it has alarmed corners of Australia’s small business and startup sector.

As the reform would tax ‘real’ gains above inflation, businesses and startups with a non-existent cost base would create only taxable gains when sold.

Critics fear this could level massive tax bills on founders when selling their business, discouraging innovation and investment.

In the week and a half since tabling the 2026-27 budget, focus has turned to potential exemptions for small businesses and startups while exposing property, shares, and other asset classes to the new CGT model.

Consultations with business stakeholders are underway.

Speaking in the House of Representatives, Chalmers said those talks focus on the “treatment of capital gains of small and startup businesses where indexation is applied to a low or zero cost base”.

“Where appropriate, these details will be finalised in subsequent legislation following consultation,” he added.

What qualifies as a “low” cost base is currently unclear, but Chalmers’ statement suggests small businesses that start with considerable assets in hand will not be spared from the proposed CGT regime.

His statement follows confirmation from Minister for Small Business Anne Aly the government will consider “reasonable” questions about lifting four pre-existing exemptions for small businesses.

Key small business representative groups, including the Council of Small Business Organisations Australia, argue those exemptions — reliant on eligibility thresholds in place since 2007 — are no longer fit for purpose.

Outside of direct consultations held by the government, a separate Senate inquiry into the bill will also challenge the reform package, which includes the negative gearing reform, a $250 tax break for working Australians, and an instant $1,000 tax deduction for work-related expenses.

That Greens-led inquiry is set to report back by June 22.

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