Treasury Laws Amendment (Tax Reform No. 1) Bill 2026

Dr RYAN (Kooyong) (12:09): While we're making generational changes to Australia's capital gains tax system, we need to ensure that wholesale reforms don't come at the expense of clear modernisations. The thresholds for small businesses claiming capital gains tax exemptions is such an area of clear modernisation. The existing CGT small-business concession regime, the SBC regime, provides a sliding scale of concessional tax treatment to business owners when they sell their businesses.

That regime is preserved by this budget. Under the current Income Tax Act 1997, in order to qualify for the regime, small businesses must have either an aggregated turnover of less than $2 million or combined net assets of less than $6 million. Those thresholds have been unchanged for almost 20 years.

The maximum net asset value test was first introduced in 1999, with the Howard government's discount. At that time, the threshold was $5 million for small businesses. That was lifted to $6 million in 2007.

The $2 million annual turnover level has also been static since 2007. Were the government to adjust these thresholds to take into account consumer price index changes since 2007, today a small business would be one with a net asset value of about $10 million or an annual turnover of about $3.3 million. There's a clear need to increase these thresholds to account for inflation and for a different business environment to the one we see today rather than 20 years ago.

The existing tax thresholds no longer reflect the realities or the operating scale of many modern small businesses. I spoke to this when I moved my second reading amendment to this legislation last night. For CGT purposes, a small business is currently considered to have a turnover of up to $2 million and net assets of $6 million, while in other tax matters the thresholds are $10 million and $12 million, respectively.

I previously suggested that that definition should be made uniform and consistent across tax matters. This suggestion is supported by the Council of Small Business Organisations of Australia, the Victorian Farmers Federation and the Australian Small Business and Family Enterprise Ombudsman. Concessional tax regimes usually have indexed thresholds.

That was acknowledged and respected most recently in the changes to taxation of superannuation. So, what I'm proposing here with these amendments in the consideration in detail of the legislation is that the net asset value test for this concessional tax regime be indexed in line with the consumer price index, as was suggested in Treasury's 2005 tax review, in order to modernise and optimise the treatment of small businesses under our capital gains tax regime.