Labor Backs Down on some of the proposed Tax Measures with Massive Small Business Trust Concessions

‍CANBERRA — In a major policy pivot following fierce industry backlash, Prime Minister Anthony Albanese and Treasurer Jim Chalmers have announced significant carve-outs to several highly contested Federal Budget tax measures.

The adjustments deliver sweeping relief to small businesses, start-ups, and family estates, while stripping away controversial proposed executive powers that would have allowed the government to alter tax laws without parliamentary oversight.

Massive Win for Small Business CGT

The most significant amendment targets the Capital Gains Tax (CGT) framework. In a major win for the business sector, the turnover threshold required to access the 50 per cent small business CGT discount has been aggressively expanded.

The threshold will jump from the originally proposed $2 million up to $10 million. Treasury estimates this adjustment will safeguard more than 2.7 million active Australian small-to-medium enterprises from heavier tax burdens upon sale.

Testamentary Trusts Safeguarded

Following intense pressure from legal and accounting bodies, the government has abandoned its plans to hit inheritance vehicles with a flat 30 per cent minimum tax rate.

Under the revised rules, all income generated by testamentary trusts will remain completely exempt from the 30 per cent minimum tax, provided the structures are established for genuine inheritance and estate planning purposes.

Fuel for the Start-Up Ecosystem

To appease the tech and venture capital sectors, the government introduced a brand-new "Innovative Business" CGT concession.

This measure aims to preserve local talent and investment by offering targeted tax relief to founders, early-stage angel investors, and employee share scheme (ESS) participants operating within qualifying start-ups.

Executive Powers Stripped

Crucially, the government has capitulated on governance concerns by entirely removing clauses that would have granted the Treasurer unilateral executive powers.

The initial draft legislation contained provisions allowing the government to alter broad taxation laws after legislation passed. Following widespread condemnation over a lack of democratic oversight, those powers have been completely excised.

Timelines and Next Steps

These amendments will run alongside previously legislated changes taking effect this upcoming financial year, including the recalibrated Stage 3 personal income tax cuts—which reduce the 15 per cent marginal rate to 14 per cent—and the introduction of the $1,000 standard work-related deduction.

The revised tax package is expected to be introduced to Parliament in the coming sitting week, where it is now anticipated to pass with smoother crossbench support.