Capital gains and death tax changes: Anthony Albanese and Jim Chalmers unveil backdowns

The Government has revealed a raft of carve-outs and amendments to its capital gains tax and negative gearing changes in a bid to clear the barnacles from the legislation it hopes to push through the Senate in the next fortnight.

More small businesses will be allowed to use capital gains tax (CGT) exemptions and the Senate will get a final say over future changes to Labor’s tax reforms under a suite of backdowns Anthony Albanese and Treasurer Jim Chalmers unveiled just four weeks after the Budget was released.

The annual turnover threshold for small businesses using the most common exemption form capital gains taxes will be lifted from $2 million to $10 million – a change that will be included in the legislation now before the Upper House.

The Government says that means all 2.7 million active small businesses and 98 per cent of all businesses will be able to use the concession.

It has also backed down on plans to impose a minimum 30 per cent tax on payouts from discretionary testamentary trusts, which are established in people’s wills, that opponents had labelled a “death tax”.

The changes to tax arrangements for trusts will be contained in legislation later in the year.

A carve out for start-ups proposes allowing founders, employees and investors to choose between taking the 50 per cent CGT discount and one based on indexation provided the company is less that 10 years old, or 15 for the biotech and medtech sector, and they’ve held their shares for at least five years.

Dr Chalmers said this “preferred position” was “making it clear, as we said in the Budget papers themselves, and before that privately, subsequently publicly, that we do consider there to be a special case for businesses with low or no start-up costs, and that necessitates this different treatment in the tax system”.

A discussion paper released on Thursday details this proposal and is open for feedback until July 10.

Dr Chalmers also laid out a range of amendments the Government plans to make to the legislation that it wants to rush through Parliament, aimed at clarifying points of concern raised by the Greens – whose support is key – and some business and housing groups.

These include ensuring charitable donations don’t get caught up in capital gains tax calculations, removing the Treasurer’s discretion to change the $250 working Australians tax offset without coming back to Parliament, and clarifying the definition of new builds and affordable housing that can use negative gearing.