Treasurer Jim Chalmers confirmed Thursday that the government is consulting on how its capital gains tax reform would affect startups and small businesses with "low or zero cost base."
The comment narrows the scope of potential carveouts as Labor pushes to pass the CGT overhaul before Parliament breaks on July 2.
What Changes
From July 1, 2027, the current 50% CGT discount disappears. Instead, gains are taxed on real appreciation above inflation, with a minimum 30% tax on those gains.
The stated goal: tax only "real" capital gains, aligning investment income closer to wage taxation.
The Startup Problem
Founders who bootstrapped from zero now face a problem. If you built a business with no initial cost base and sell it for $5 million, the entire gain could be taxable under the new rules.
Under the old system, that $5 million exit carried a 50% discount. Under the new model, you pay tax on the full inflation-adjusted gain, likely the entire sale price for recently founded companies.
That is a massive tax hit at exit, which critics say discourages the exact risk-taking the government claims to support.
What Treasury Is Considering
Chalmers did not specify what carveouts are on the table. Likely options include exemptions for early-stage companies, caps on taxable gains for qualifying startups, or extended holding periods that trigger lower rates.
For context: the US has QSBS (Qualified Small Business Stock) rules that exempt up to 100% of capital gains on qualifying startup equity held for five years. Australia currently has no equivalent. Whether this reform moves toward or away from that model depends entirely on what comes out of consultation.
What Else Is in the Budget
The government is also introducing startup loss refundability from 2028-29, letting early-stage companies claim cash refunds on losses in their first two years. That measure is expected to help up to 85,000 companies.
The $20,000 instant asset write-off for businesses with turnover under $10 million gets extended, improving cash flow by an estimated $890 million over five years.
Why It Matters
If you are an AE at an early-stage startup, this affects your equity comp. If you are a founder considering raising capital, this changes the math on exits. If you are selling into the startup market, this is a headwind.
The consultation window is narrow. Parliament breaks in five weeks. Whatever carveouts get negotiated will set the rules for the next decade of Australian startup exits.