Prime Minister Anthony Albanese and Treasurer Jim Chalmers have just announced they will change course on the controversial capital gains tax changes in last month's federal budget.
Significant carve-outs are now on the table after a considerable backlash to the plan to abolish the 50 per cent capital gains tax discount.
Here's what it means for small business owners in Canberra and across the nation.
The government had planned to get rid of the 50 per cent capital gains tax discount and replace it with inflation-based cost indexation.
This aimed to slow house price growth and make homes more affordable for first home buyers, in conjunction with abolishing negative gearing.
Instead, Mr Albanese announced plans to add carve-outs to the tax changes in legislation that is before a Senate inquiry due to report on Friday.
They will include increasing the existing small business 50 per cent active asset CGT concession from $2 million to $10 million.
This was the most-used CGT concession used by small businesses, the Prime Minister said, with 2.7 million existing active small businesses eligible.
Three other concessions would also be retained, he said.
The full details will be in a discussion paper to be released later today.
The original CGT policy had sparked outrage from small business owners who complained that the government was going to remove the incentive to take a risk in pursuit of a future reward.
Many argued that increasing the amount of tax levied on gains achieved when an asset was sold was unfair.
The outrage has been most pronounced in start-ups, which often have low capital at inception and involve risk for founders, as well as early employees who take share options in exchange for lower pay.
Mr Albanese said discretionary trusts would be exempted from the minimum 30 per cent tax unveiled in the budget in cases where they were used for "genuine testamentary purposes."
Dr Chalmers has rejected the characterisation of these proposed changes by the Coalition as a "death tax."
