Yesterday, the federal government announced expanded capital gains tax relief for small businesses, a new concession for innovative startups, and further detail on trusts. For construction business owners, there are real changes worth understanding before they see their accountant.
Last updated: June 2026
The tax reform package the federal government handed down on 12 May has been through its first round of post-budget consultation. Today, Prime Minister Anthony Albanese and Treasurer Jim Chalmers announced what has changed.
For small construction businesses, two changes are directly relevant. A third relates to trusts. And there is an important update on the new build definition that anyone working in investor-grade residential construction should pay attention to.
None of this is law yet. The legislation is before the Senate. But the policy direction is now clearer than it was on budget night.
The Small Business CGT Threshold Has Been Raised to $10 Million
The existing small business CGT concessions allow eligible business owners to reduce, defer or in some cases completely eliminate their capital gains tax liability when they sell active business assets. There are four of them. None have been removed by the budget. But access to one of them has now changed.
The most widely used of the four is the 50 per cent active asset reduction. An active asset is broadly one used in running the business: goodwill, key plant and equipment, commercial property in some circumstances. Until today, this concession was available to businesses with annual turnover under $2 million.
The government has announced it will lift that threshold to $10 million.
That is a significant expansion. The $10 million figure aligns with the turnover limit for the permanent instant asset write-off introduced in the same budget. According to the government, the change brings all 2.7 million active small businesses, representing 98 per cent of active businesses in Australia, into eligibility for this concession.
For a building business owner planning to sell business assets after 1 July 2027, this matters. The 50 per cent active asset reduction sits on top of the inflation indexation that replaces the old flat 50 per cent CGT discount from that date. In combination, the two mechanisms can significantly reduce the taxable gain on a business sale.
The threshold change aligns the active asset reduction with the instant asset write-off limit. That alignment is deliberate. The government is trying to create a consistent definition of small business across the tax system.
The government says it will introduce amendments to the legislation currently before the Senate to give effect to this change. The interaction between the four small business concessions and the new CGT rules is genuinely complex. Get qualified advice before making any decisions about timing a sale.
Testamentary Trusts Are Now Exempt From the Minimum Tax
The budget proposed a minimum 30 per cent tax on the taxable income of discretionary trusts from 1 July 2028. That announcement drew immediate criticism, including concern that it amounted to a de facto death tax on inherited assets. The minimum tax on discretionary trusts and what it means for construction businesses operating through family trust structures was covered in detail at the time.
Today, the government confirmed that income from all types of discretionary testamentary trusts will be exempt from the minimum tax, provided the trust is established for genuine testamentary purposes. A testamentary trust is one created under a will to manage the distribution of a deceased estate.
The exemption applies to income from assets of the deceased estate. For trusts established on or after 1 July 2028, it will only apply where the trust can benefit individuals and income tax exempt entities.
This does not change the position on standard family trusts used in business structures. The minimum 30 per cent tax on those still applies from 1 July 2028. If your construction business operates through a family trust, you still need to review your structure with your accountant before that date.
A New Concession for Innovative Startups Is Being Consulted On
The government has released a consultation paper on what it is calling the Innovative Business CGT Concession. This responds to backlash from the startup and venture capital sector, which argued the shift to indexation would effectively destroy the economics of early-stage investment, where companies typically start with a near-zero cost base.
The proposed concession would allow individuals, partnerships and trusts holding shares in eligible companies to choose between the 50 per cent discount or the new indexation approach on gains accrued from 1 July 2027.
Subject to consultation, to be eligible a company would need to be under 10 years old, under $50 million in turnover, and meet principles-based innovation criteria. Shares would need to be held for at least five years. There would be a lifetime cap on the concession. The government indicated it would consider extending eligibility to 15 years for sectors that typically take longer to commercialise, naming biotech and medtech.
Consultation closes 10 July. The final design will be legislated in a later tranche. For most builders, this is background rather than a direct planning issue. Where it may be relevant is for construction technology companies or trade businesses structured to attract early-stage investment.
The New Build Definition Is Still Being Legislated
One of the most consequential unresolved questions since budget night has been the precise legal definition of what qualifies as a new build. The negative gearing and CGT changes that take effect from 1 July 2027 treat new builds more favourably than established properties. Investors in new builds can continue to negatively gear losses against other income, and can choose the 50 per cent CGT discount rather than moving to the new indexation model. But that only matters once the definition is locked in.
Today, the government confirmed the definition will be moved into primary legislation in a future tranche of tax reform bills, with final details subject to consultation.
The broad parameters from budget night remain in place. A new build is generally a property that adds to net housing supply. That includes newly constructed apartments bought off-the-plan, duplexes or similar dwellings replacing a single property where the number of dwellings increases, and residential construction on previously vacant land. A newly built property occupied for less than 12 months before first sale also qualifies.
What does not qualify: knock-down rebuilds that do not increase the dwelling count, granny flats added to existing established properties, and properties occupied for more than 12 months before first sale.
Builders working in off-the-plan apartments, townhouses, and medium density should follow the consultation process when it opens. The definitional boundaries will shape how investor demand flows in those market segments from 1 July 2027 onwards.
The Good Builder Take
The government is responding to industry pressure. The threshold increase for the active asset reduction is a genuine and meaningful concession for small business owners. Lifting it from $2 million to $10 million brings a much larger portion of the construction industry into scope, not just the smallest operators.
What has not changed: the core CGT and negative gearing reform package. The 50 per cent discount is still being replaced with indexation and a 30 per cent minimum tax from 1 July 2027. Negative gearing for established residential properties purchased after 12 May 2026 is still being restricted from the same date. That is the framework the market is now working around.
For builders, the practical read is straightforward. New construction remains favoured under the new tax settings. If you have business assets you are thinking about selling, the expanded active asset reduction threshold changes the planning calculation. If your business runs through a family trust, the minimum trust tax clock is still running toward 1 July 2028. Get proper advice before acting on any of this.
Your Questions Answered:
What is the small business CGT active asset reduction?
The active asset reduction is one of four small business capital gains tax concessions under Australian tax law. It allows eligible business owners to reduce a capital gain on the sale of an active business asset by 50 per cent. An active asset is broadly one used in carrying on a business, which can include business goodwill, plant and equipment, and in some circumstances commercial property. This reduction is applied after the general indexation discount. It can be stacked with other small business CGT concessions depending on the circumstances. The other three are the 15-year exemption, the retirement exemption, and the rollover.
How has the small business CGT threshold changed in 2026?
The 50 per cent active asset reduction previously applied to businesses with annual turnover under $2 million. The government has announced it will lift that threshold to $10 million. This aligns the concession with the turnover threshold for the permanent $20,000 instant asset write-off. The change has not yet passed Parliament, but the government has flagged it will introduce amendments to the legislation currently before the Senate.
Do builders qualify for small business CGT concessions?
Many do. Eligibility depends on the specific structure and circumstances of the business. The four small business CGT concessions are generally available to businesses that meet either a maximum net asset value test of $6 million or, for the active asset reduction, the annual turnover threshold now proposed at $10 million. The asset being sold also needs to qualify as an active asset. For a building business selling goodwill, a business name, or plant and equipment used directly in the business, the concessions can apply. The interaction between these concessions and the new CGT rules from 1 July 2027 is complex. Get qualified advice specific to your circumstances.
What is the new build definition for negative gearing in Australia?
The government confirmed today that the precise definition will be legislated in a future tranche of tax reform bills following consultation. Based on what has been outlined to date, a qualifying new build is broadly a property that adds to net housing supply. This includes newly constructed apartments bought off-the-plan, duplexes or multi-dwelling developments that replace a single property and increase the number of dwellings, residential construction on previously vacant land, and newly built properties occupied for less than 12 months before first sale. Knock-down rebuilds that do not increase the dwelling count, granny flats on established properties, and previously occupied properties do not qualify. The final legislative definition may differ from these parameters once consultation concludes.
What happens to discretionary trusts under the 2026 federal budget?
The budget proposed a minimum 30 per cent tax on the taxable income of discretionary trusts from 1 July 2028. Today’s announcement added an exemption for discretionary testamentary trusts established for genuine testamentary purposes, meaning trusts set up under a will to manage a deceased estate. Standard family trusts used by construction businesses to hold assets and distribute income are not exempt. The minimum tax on those structures is still scheduled from 1 July 2028. For a full breakdown of how this applies to builders and subcontractors, see the TGB guide to the discretionary trust minimum tax.
General Information Disclaimer: This article draws on the Prime Minister’s media release of 18 June 2026 and associated Budget 2026-27 documentation. It is editorial commentary for industry professionals and does not constitute financial, tax, legal or structural advice. Legislation implementing these measures has not yet passed Parliament. Seek qualified professional advice before making any decisions.
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