The Government has announced modifications to its Budget proposals
On 18 June 2026, the Prime Minister and the Treasurer announced modifications to the Government’s 2026-27 Budget proposals.
The announced proposals include:
increasing the turnover threshold for the existing small business 50% active asset CGT reduction;
exempting income from all testamentary trusts, including future discretionary testamentary trusts, from the proposed 30% minimum tax;
releasing a consultation paper on a proposed 50% CGT discount for early-stage investors, including founders and employee share scheme participants, in start-up businesses;
making amendments to the legislation in the Senate, rather than relying on legislative instruments, including amendments concerning charitable donations and the definition of “new residential premises”.
The announcement is a constructive development. However, the Government should undertake further consultation on both the newly announced proposals and the broader Budget measures to reduce the risk of unintended consequences.
Turnover threshold for the 50% active asset reduction lifted to $10 million
The Prime Minister stated:
“Today we’re announcing that we’ll increase the turnover threshold for existing small business 50 per cent active asset CGT concession from $2 million to $10 million”
The increase applies to one concession only. Division 152 of the Income Tax Assessment Act 1997 contains four small business CGT concessions: the 15-year exemption, the 50% reduction, the retirement exemption, and the roll-over. The proposal applies only to the 50% active asset reduction, leaving the other three concessions unchanged.
The new $10 million turnover threshold aligns the 50% active asset reduction with the threshold used for the instant asset write-off. On the Government’s figures, 2.7 million active small businesses and 98% of all active businesses fall within the $10 million threshold and may access the 50% active asset reduction, subject to the other eligibility conditions.
The Treasurer characterised the measure as an expansion of the existing concession, rather than a replacement:
“There are four existing concessions for businesses in the CGT system. We’re leaving all four in place, but we are making one of them substantially broader and significantly more generous at the same time”
After enactment of the relevant legislation, businesses with turnover between $2 million and $10 million that were previously outside the turnover threshold for this concession will fall within the threshold and should review their eligibility.
The concession will not apply automatically. The taxpayer must still satisfy the active asset test and the other eligibility conditions, including the basic conditions in Subdivision 152-A. Even so, the proposal materially broadens the class of businesses that may qualify.
Although the announcement is welcome, it is likely to increase the compliance burden for small and medium businesses when assessing eligibility for the complex small business CGT concessions, as the turnover threshold will be $10 million for the 50% active asset reduction but $2 million for the other tests.
Testamentary trusts will be exempt from the minimum tax, with legislative detail to follow
The Treasurer confirmed that the Government will exclude income from all types of testamentary trusts from the proposed minimum tax on discretionary trusts:
“We are also confirming that income from all types of testamentary trusts will be exempt from the minimum tax, with implementation details, including the details around integrity, to be included in further consultation”
The Government has characterised this measure as confirming the existing policy treatment, rather than creating a new exemption, stating that there is “no tax on inheritances or deceased estates”.
The accompanying Media Release provides the first detail on the scope of the exemption, including its practical limits.
The exclusion will be limited to income from the assets of the deceased estate and, in the Prime Minister’s words, discretionary testamentary trusts established for “genuine testamentary purposes”. The intended scope remains uncertain, particularly given the 2018-19 amendments to section 102AG of the Income Tax Assessment Act 1936, which limit excepted trust income by reference to property transferred from the deceased estate and accumulations from that property. The integrity rules that will apply to the exemption also remain to be settled.
For discretionary testamentary trusts established on or after 1 July 2028, the exclusion will apply only to trusts that can benefit individuals and income tax exempt entities.
At this stage, the exemption is a stated commitment rather than finalised legislation. It does not form part of the first tranche of legislation before the Senate. As the Treasurer explained:
“When it comes to exempting all types of testamentary trusts from the minimum tax, we will release a consultation paper on the trust legislation, that is obviously not part of this first tranche before the Senate.”
A separate consultation paper on the broader minimum tax on discretionary trusts is also expected in the coming weeks. Until the Government releases that detail, taxpayers should treat the testamentary trust exemption as confirmed in policy but not settled in legislative design.
Consultation for start-ups
The Government stated in the Budget papers that:
“Given the unique characteristics of the tech and start up sector the Government will consult on the interaction of the capital gains tax reforms and incentives for investment in early-stage and start-up businesses.”
The Government has now released a consultation paper on the design of the proposed 50% CGT discount for early-stage investors, including founders and employee share scheme participants in innovative start-up businesses. The consultation paper proposes to give individuals, trusts and partnerships a choice between the 50% discount or indexation and the minimum tax for gains accrued before 1 July 2027.
Subject to further consultation, eligible shares would need to satisfy the following requirements:
the company must issue the shares as new equity and be less than 10 years old, with a possible 15-year period for certain sectors, including biotech and medtech;
the company must have turnover of less than $50 million and satisfy principles-based innovation criteria;
the investor must hold the shares for at least five years before disposal; and
the rules will include a lifetime cap.
More certainty for charitable giving
The Government also announced a structural change. Rather than leaving key details to legislative instruments, it will make targeted amendments to the legislation in the Senate to remove ministerial powers. This includes the definition of “new residential premises”, for purposes of the CGT discount, with legislation to be introduced later this year following further consultation.
The Government also proposes to preserve the benefit of charitable donations. It will ensure that deductible gifts and donations reduce capital gains that are subject to the minimum tax, thereby preserving the value of those gifts under the proposed minimum tax on capital gains. It remains unclear whether the Government will take the same approach to the non-refundable offset for tax paid by the trust.
Next steps
The announcements remain unenacted, and material detail may emerge through consultation and the legislative process. We will continue to monitor the consultation process and the draft legislation as it progresses.
If you would like to discuss how these changes may affect your business, structure, or estate planning, please contact one of our team below:
Neil Brydges
Principal | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E nbrydges@sladen.com.au
Daniel Smedley
Principal | Accredited Specialist in Tax Law
M +61 411 319 327 | T +61 3 9611 0105
E dsmedley@sladen.com.au
Kaitilin Lowdon
Principal Lawyer
M +61 402 859 214 | T +61 3 9611 0120
E klowdon@sladen.com.au
Kseniia Gasiuk
Associate
T +61 3 9611 0160
E kgasiuk@sladen.com.au
