Australia to expand small business tax discounts
Sydney (18 June)
The Australian Government will allow all active small business investors to claim 50% active asset discounts on their capital gains tax (CGT) bill – in addition to recently announced inflation-linked discounts – to encourage investment.
It also plans to offer early-stage investors, founders, and early workers a 50% CGT discount, Treasurer Jim Chalmers told reporters on 18 June.
Businesses currently need to have an annual turnover of up to A$2 million dollars to access active asset discounts. But the Government plans to expand its active asset discount eligibility criteria to support businesses with an annual turnover of up to A$10 million, it said.
“Every one of the 2.7 million active small businesses in this country will have access to generous CGT concessions and 98 per cent of all active businesses will be eligible for these concessions,” Treasurer Jim Chalmers told reporters.
The Government’s tax reforms are meant to provide clarity and confidence to investors, support for small businesses, and incentives for innovation, Chalmers added.
They come just over a month after the Government announced changes to its CGT in its 2026 Budget to disincentive property investment. It introduced a 30% minimum tax on most inflation-adjusted capital gains and replaced a blanket 50% CGT discount with an inflation-indexed discount.
Business groups and investors have raised concerns about the impact of Budget tax changes on Australia’s small business and start-up sector.
“While most founders may not begin their startup journey with the Government’s tax settings front of mind, if no change is made, they’ll quickly learn the hard way that talent and capital are mobile,” Tech Council of Australia CEO Kate Cornick told the Senate Economics Committee on 16 June.
“If you cut the after-tax reward for founders, employees and investors, the negative impact quickly compounds. Investors back away. Fewer founders get the capital they need to grow, or they move overseas to more attractive innovation ecosystems,” Cornick added.
Australia’s startup sector raised A$5.1 billion in 2025, up 24% on the year, according to the 2025 State of Australian Startup Funding report. But just 20 capital raises accounted for 58% of the investment, the report found.
Startup investment could rise again in 2026. Over half of investors surveyed in the State of Australian Startup Funding report expect to increase the number of deals they close over the year.
By Avinash Govind