18/06/2026
There are backflips, and then there are political backflips.
A proper backflip is clean. Elegant. Impressive. You start facing one direction, launch yourself into the air, rotate with purpose, and land somewhere noticeably different from where you began.
A political backflip is when you take half a step sideways, loudly announce you have listened to the community, and hope nobody notices you are still standing in almost exactly the same place, only now with a media release.
That appears to be where we are with the Albanese Government’s proposed capital gains tax changes.
After a reasonably predictable backlash from business owners, advisers, lawyers, accountants, investors and anyone else who has ever opened the Income Tax Assessment Act without immediately needing a lie down, the Government has now announced what is being described as a concession to small business.
And to be fair, there is a concession.
Businesses with turnover between $2 million and $10 million will now be eligible for the 50% active asset reduction when selling active business assets. That matters. For some business owners, it will make a real difference. Nobody should pretend otherwise.
But calling this a full backflip is doing a lot of work.
The key issue remains.
The general 50% CGT discount is still proposed to disappear after 30 June 2027, replaced by an inflation-based calculation and a 30% minimum tax rate on certain capital gains. Which means the tax system still needs to know what part of a future capital gain relates to the period before 1 July 2027, and what part relates to the period after.
And in the real world, where small businesses are not traded on the ASX every afternoon between lunch and a Teams meeting, that means valuations.
A lot of valuations.
If you own a small business, and you might one day sell that business, restructure that business, transfer that business, admit a new owner, buy someone out, separate from a spouse, die inconveniently, or otherwise interact with the tax system in any meaningful way, there is now a very good chance that the value of that business at 30 June 2027 is going to matter.
Not necessarily because tax is payable on that date. That is not the point.
The point is that 30 June 2027 becomes a line in the sand. And when tax law draws a line in the sand, accountants eventually have to turn up with a shovel, a spreadsheet, and the emotional range of a hostage negotiator.
Now, I should acknowledge a conflict of interest here. I specialise in small business valuations. So from a purely selfish perspective, this might be excellent news. It is not every day the Federal Government designs a tax policy that appears to double as a business development strategy for my valuation division.
But that is sort of the problem.
When the person who benefits from the complexity is looking at the policy and saying, “Are we sure this is a good idea?”, perhaps the room has gone a little quiet for a reason.
The Government is presenting this as support for small business. And again, expanding the active asset concession to businesses up to $10 million in turnover is better than not doing that. But it does not undo the broader change. It does not remove the administrative burden. It does not remove the need for small business owners to understand where they stood at 30 June 2027. It does not remove the fact that the tax position on a future sale may depend on a valuation performed years earlier, based on records, assumptions, maintainable earnings, goodwill, risk, market evidence and all the other things that make normal people’s eyes glaze over while valuation specialists start quietly sharpening their pencils.
This is the strange thing about tax reform. It is often sold as fairness, but delivered as paperwork.
Then there is the testamentary trust issue.
The Government has also now indicated that testamentary trusts will generally be excluded from the proposed 30% minimum tax on discretionary trust distributions, subject of course to integrity measures to make sure they are used for genuine inheritance purposes.
Which sounds suitably serious. “Integrity measures” is one of those phrases governments use when they want to imply danger, sophistication and control, without necessarily explaining what any of it means.
Oooooo. Integrity measures.
Very scary.
But the more obvious point is this: testamentary trusts should probably never have been caught up in this in the first place.
A testamentary trust is not some exotic tax beast discovered behind a curtain at a Gold Coast wealth seminar. It is a common estate planning tool. It is often used to protect inheritances, manage assets for young beneficiaries, support vulnerable family members, and deal with the practical reality that sometimes people die and their affairs are more complicated than a single bank account and a Bunnings voucher.
Anyone with even a mild understanding of tax law, estate planning or how families actually work could have pointed this out early.
Which suggests one of two things.
Either the Government knew exactly what it was doing and decided to include testamentary trusts anyway, then backed away once people noticed. Or it did not properly think about testamentary trusts when the policy was first announced.
Neither option is particularly comforting.
And then, because tax policy is apparently not already irritating enough, we get the language around the concession “costing” the Government money.
There it is again. That beautiful little word. Cost.
The Government changes a proposal so that it takes slightly less money from taxpayers than it originally planned, and this is described as a cost to the budget.
This is one of the great linguistic tricks of modern politics. Your money becomes government revenue in waiting. Any decision not to take as much of it as previously forecast is then treated like spending. As though Treasury had already placed your future capital gain on a shelf somewhere in Canberra, perhaps next to a framed photo of bracket creep and a commemorative mug that says “Fairness”.
But leaving more money with the person who earned it is not a cost in the normal sense of the word.
It may reduce projected revenue. It may affect budget forecasts. It may require the Government to explain how it intends to fund its promises. All of that is fair.
But it is not the same as the Government reaching into its own pocket and giving something away.
That distinction matters, because language matters. If every dollar not collected is a cost, then every taxpayer is just a temporary custodian of government property. You can see how that might make people who have spent 20 years building a business feel slightly less enthusiastic about being told they are the blood running through the veins of the economy.
Nice line, by the way.
Small businesses are the blood running through the veins of the economy.
Beautiful.
But if that is true, perhaps stop trying to take a sample every time they stand still.
The frustrating part is that small business owners are not allergic to tax. They understand that tax exists. They understand that governments need revenue. They understand that concessions should be properly targeted and that rules should not be abused.
What they object to is being told a complex, rushed, uncertain and still-evolving tax change is actually clarity.
They object to being told a partial concession is a backflip.
They object to legislation being announced before the details are fully understood, then amended after the obvious consequences become politically inconvenient.
And they definitely object to the idea that money they keep is somehow money the Government has lost.
So yes, the Government has moved. Slightly. It has softened one part of the proposal. It has recognised that small businesses between $2 million and $10 million turnover should not be treated like irrelevant rounding errors. It has also apparently remembered that testamentary trusts exist, which is nice.
But the bigger issue remains.
The general CGT discount is still proposed to go. The 30 June 2027 valuation problem is still sitting there. The trust tax legislation is still unfinished. The uncertainty is still real. And small business owners are still being asked to plan around tax rules that appear to be changing in real time, like a home renovation where the builder keeps saying, “Don’t worry, we’ll work out where the stairs go later.”
As someone who advises small businesses, I can see the work coming.
As someone who cares about small businesses, I can see the problem.
And as someone who does business valuations, I suppose I should say thank you.
Although it does feel a bit like thanking the arsonist for creating demand for smoke alarms.
Labor has granted tax concessions to small businesses, start-ups and testamentary trusts following backlash against its contentious budget tax changes.
Read more: https://ebx.sh/L9Nq0l
