On 18 June 2026 the Federal Government announced carve-outs to its proposed capital gains tax (CGT) reforms. The small business 50% active asset reduction turnover threshold lifts from $2 million to $10 million. A new Innovative Business CGT Concession offers a 50% discount for eligible start-up investors. All testamentary trusts are confirmed exempt from the proposed 30% minimum tax. These remain proposals, and the core CGT changes still apply from 1 July 2027.
The Government has moved to soften parts of its proposed CGT reform package following an intensive round of post-Budget consultation. On 18 June 2026, the Prime Minister and Treasurer released further implementation detail aimed at three groups that raised the loudest concerns: small business owners, founders and investors in innovative start-ups, and families relying on testamentary trusts for succession planning.
The measures build on the broader reforms first announced in the 2026–27 Federal Budget, which replaces the flat 50% CGT discount with cost base indexation and a 30% minimum tax on real capital gains from 1 July 2027. The carve-outs do not unwind that change. They sit alongside it. Below, we set out what was announced, who it helps, and what business owners should be thinking about while the detail is finalised.
The Government announced three carve-outs to its proposed CGT reforms: a higher small business turnover threshold for the 50% active asset reduction, a new 50% concession for innovative start-ups, and a confirmed exemption for all testamentary trusts from the proposed 30% minimum tax on discretionary trusts.
The announcement followed consultation flagged in the Budget papers. The Government also confirmed that the changes will be made through amendments to the legislation currently before the Senate, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, rather than through separate legislative instruments. The stated intent is to give taxpayers more certainty on the detail. The three carve-outs are summarised below.
| Measure | What changed | Status |
|---|---|---|
| Small business 50% active asset reduction | Turnover threshold lifts from $2m to $10m | Senate amendment; from 1 July 2027 |
| Innovative Business CGT Concession | New 50% discount for eligible start-up equity | Consultation to 10 July 2026; later tranche |
| Testamentary trust exemption | All testamentary trusts exempt from 30% minimum tax | Confirmed in principle; detail to follow |
From 1 July 2027, the turnover threshold for the small business 50% active asset reduction rises from $2 million to $10 million. A business with up to $10 million in aggregated turnover can halve the assessable capital gain on the sale of an active business asset. The other three small business CGT concessions are unchanged.
This is the only change to the small business CGT concessions in the announcement. The Government has retained all four existing concessions and made just one of them, the 50% active asset reduction, substantially broader. The new $10 million threshold aligns this concession with the turnover threshold used for the instant asset write-off. On Treasury figures, all 2.7 million active small businesses, and 98% of all active businesses, are expected to be eligible.
Source: Australian Government, Prime Minister's media release and Treasury, 18 June 2026.
Two points warrant care. First, the $6 million maximum net asset value test and the $2 million turnover threshold that apply to the other three concessions (the 15-year exemption, the retirement exemption, and the small business rollover) have not been lifted as part of this announcement. Second, of the four concessions, the 50% active asset reduction is the least valuable in absolute dollars. It halves the assessable gain, on top of any inflation-based discount, but it does not eliminate or defer the gain the way the other three can. Owners planning a sale should map their position against all four tests, not just the headline threshold. For tailored modelling, our tax planning team can run the numbers, and our business tax service covers the disposal mechanics.
The Innovative Business CGT Concession is a proposed 50% CGT discount for early-stage investors, founders, and employee share scheme participants in qualifying innovative start-ups. Eligible holders could choose the 50% discount instead of cost base indexation plus the 30% minimum tax, subject to strict conditions and a proposed $10 million lifetime cap.
The concession is designed to protect investors whose shares start with a low or zero cost base, where indexation offers little relief. It would let individuals, partnerships, and trusts holding eligible shares choose between a 50% discount (with no minimum tax) or the new indexation plus 30% minimum tax method, for gains accrued from 1 July 2027. Under the proposed design, eligible shares must be new equity issued by a company that:
The design is still under consultation. Submissions close on 10 July 2026, and the concession will be delivered in a later tranche of legislation. The practical effect is that start-up tax outcomes may become more timing-sensitive: when equity is issued, whether the company is genuinely innovative at that time, whether it stays within the age and turnover limits, and whether the five-year holding period is met will all matter. Founders and early investors should keep clear records now. We support founders and equity holders through our start-up advisory service and our work with technology and SaaS businesses, and our guide to structuring a start-up covers the equity decisions that feed into eligibility.
Yes. The Government has confirmed that income from all types of testamentary trusts will be exempt from the proposed 30% minimum tax, provided they are established for genuine testamentary purposes. Income from a genuine inheritance trust continues to be taxed under current rules, not automatically at 30% in the trustee's hands.
The Budget proposed a 30% minimum tax on discretionary trusts from 1 July 2028, paid at the trustee level. Initially the measure appeared to capture future testamentary trusts, with only limited carve-outs. That raised concern that the regime would, in effect, operate like a tax on inheritances. The 18 June announcement extends the exemption to all testamentary trusts, including those created in future, not just those in existence at Budget night.
Based on current announcements, the exemption is expected to apply where the trust is established for genuine testamentary purposes, the income is derived from assets of the deceased estate, and beneficiaries are confined to individuals and income-tax-exempt entities. Final detail will follow in consultation. The chart below uses the Treasury worked example to show why the minimum tax was proposed in the first place, and therefore why the testamentary carve-out matters for families.
Source: Treasury, Budget 2026–27, Minimum Tax on Discretionary Trusts fact sheet. Example assumes income split equally across four adult beneficiaries with no other income.
It is worth noting this is not, technically, a death tax. Australia abolished death duties in 1979. The minimum tax changes how income distributed from discretionary trusts is taxed, and testamentary trusts have now been carved out of that change. For background on how these structures work, see our explainer on trusts in Australia.
If you are weighing a business sale, a capital raise, or an estate plan, we can map these proposals against your circumstances.
Contact Us Today →The core CGT changes apply to gains from 1 July 2027. The 30% minimum tax on discretionary trusts applies from 1 July 2028. The small business threshold increase takes effect from 1 July 2027. The carve-outs remain proposals, so current rules continue to apply until legislation passes.
The reforms are being introduced in stages. The timeline below sets out the key dates announced so far.
For confirmation of the trust start date and exclusions, see the ATO guidance on the minimum tax on discretionary trusts and the Treasury small business explainer.
No immediate action is required while the detail is finalised, and we would caution against restructuring assets or accelerating transactions based on measures that are not yet law. The current rules continue to apply until the legislation passes. That said, several groups should start preparing:
Our view is that preparation, not pre-emptive restructuring, is the right posture for now. The carve-outs reduce the impact of the reforms for many small businesses and families, but they add conditions and caps that reward good record-keeping and forward planning. Our business advisory team and small business accountants can help you map the options, and our note on company structures in Australia is a useful starting point if restructuring is on the table.
The Government has softened its CGT reforms for small business, start-ups, and testamentary trusts, while keeping the broader package intact. The small business 50% active asset reduction threshold rises to $10 million, a new 50% start-up concession is on the table, and all testamentary trusts are exempt from the proposed 30% minimum tax. The changes remain proposals. The core CGT reforms still apply from 1 July 2027, and the trust minimum tax from 1 July 2028. The sensible step now is to understand your position and plan ahead, not to act on measures still working through Parliament.
Sit down with a CPA to work through how these proposals affect your business, your investments, or your estate plan.
Schedule a meeting →Disclaimer: The information provided in this article is general in nature and does not constitute specific tax, legal, or financial advice. The measures described are proposals announced on 18 June 2026 and are not yet law; final detail may change. We recommend seeking professional advice tailored to your individual circumstances. 42 Advisory is a CPA firm and Registered Tax Agent.
No. The broader CGT reforms remain in place. From 1 July 2027, the flat 50% CGT discount is replaced by cost base indexation plus a 30% minimum tax on real gains. The 18 June 2026 announcement added carve-outs for small business, start-ups, and testamentary trusts, but did not reverse the core reform.
No. The increase from $2 million to $10 million applies only to the 50% active asset reduction. The 15-year exemption, the retirement exemption, and the small business rollover keep their existing $2 million turnover threshold and the $6 million maximum net asset value test.
Under the proposed design, individuals, partnerships, and trusts holding eligible new equity in qualifying innovative start-ups. The company must generally be unlisted, independent, under 10 years old, and below $50 million turnover, and the shares held for at least five years, subject to a proposed $10 million lifetime cap. The design is open for consultation until 10 July 2026.
Not under the announced framework. Income from testamentary trusts established for genuine testamentary purposes is exempt from the proposed 30% minimum tax. The exemption is expected to apply where income is derived from deceased estate assets and beneficiaries are individuals or tax-exempt entities. Final detail will follow in consultation.
No immediate action is required, and these are still proposals. Current rules apply until legislation passes. We recommend understanding your position and keeping good records, rather than restructuring or accelerating transactions based on measures that are not yet law.