Budget update: tax exemptions for small businesses and trusts
The federal government has announced changes to its proposed Capital Gains Tax (CGT) reform package that were released in last month’s Federal Budget. This includes concessions for small businesses, exemptions for testamentary trusts and consultation on a new concession for innovative start-ups.
The details were announced on 18 June 2026, following the first round of post-Budget consultation. The changes are still proposed and will depend on final legislation.
Businesses with a turnover of up to $10 million will be eligible for the existing 50% active asset reduction after the initial inflation-based cost adjustment is applied (where eligible). This is an increase from the current $2 million threshold and means more businesses may be able to access 50% active asset reduction if they meet the other eligibility rules. There are no proposed changes to eligibility for the other small business CGT concessions, with turnover thresholds remaining at $2 million.
The government will release a consultation paper on the implementation of the minimum tax on discretionary trusts in the coming weeks. In response to consultation, income from all types of discretionary testamentary trusts will be exempt from the minimum 30% tax, subject to conditions.
The exclusion would apply only to income from assets of the deceased estate. For testamentary trusts established on or after 1 July 2028, the exclusion would only apply to trusts that can only benefit individuals and income tax exempt entities.
Testamentary trusts are commonly used in estate planning to distribute assets to beneficiaries after death. If your estate plan involves one of these structures, speak to your Boyce advisor about how the proposed conditions may apply.
The government has released a consultation paper on a proposed Innovative Business CGT Concession. If confirmed, the concession would provide a 50% CGT discount to early-stage investors, including founders and employee share scheme participants of innovative start-up businesses, from 1 July 2027.
If you hold assets through a small business, a trust, or in your own name, the proposed CGT reforms may affect your planning differently depending on your structure, the type of asset involved, when the gain accrues, and whether you qualify for existing concessions.
The best step is to understand your current position and identify where the proposals could affect you if they become law. This is especially important if you own business assets, hold investments through a trust, or are considering a future sale. However, as these changes are not set to apply until a future date and are not yet law, unless there is an immediate need for change it will likely be prudent to wait for the proposals to be enacted before acting.
Speak with your Boyce advisor on what the appropriate actions are timeframes are for you. We can help you understand what the announcements may mean for your circumstances and what steps to take.
We will continue to monitor further guidance and updates as more detail becomes available.
Brian Wray recently joined the Farms Advice podcast to discuss what the budget means for Australian farm businesses, with a particular focus on trusts and tax structures.
This article is general in nature and refers to proposed measures that are not yet law. It is not financial, taxation or legal advice. Please get in touch with your Boyce advisor to discuss your own situation.
