Small Business CGT Carve-Outs May Strengthen Borrowing Confidence
What the tax shift could mean for funding, valuations and growth plans
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Australian small businesses and start-ups have gained a clearer view of future tax settings after the federal government announced significant carve-outs to its planned capital gains tax reforms.
For business owners considering expansion, succession, acquisition funding or new investment, the changes could help reduce some uncertainty at a time when finance decisions are already being shaped by higher rates, tighter serviceability checks and cautious lender appetite.
The key change is an increase in the turnover threshold for the small business 50% active asset CGT reduction, lifting it from $2 million to $10 million. Treasury estimates suggest the revised threshold will cover the overwhelming majority of active Australian businesses. For founders and SME operators, this matters because exit value, retained capital and future tax liabilities often influence how lenders, investors and advisers assess the strength of a business plan.
The government has also proposed a new Innovative Business CGT Concession aimed at eligible start-ups and their investors. The measure is expected to apply to businesses with annual turnover below $50 million, operating for less than 10 years and undertaking genuine innovative activity. Investors would generally need to hold shares for at least five years to access the concession, with transitional arrangements applying ahead of the broader reform start date of 1 July 2027.
For borrowers, the practical takeaway is not that tax relief automatically improves loan approval prospects. Lenders will still focus on trading history, cash flow, existing liabilities, director credit profiles, security and the purpose of funds. However, greater certainty around future CGT outcomes may support stronger business valuations, cleaner succession planning and more confident investment conversations.
This could be particularly relevant for owners seeking capital to purchase equipment, fund stock, acquire another business, refinance expensive short-term debt or prepare for a sale. If you are weighing up these decisions, it is worth reviewing cash flow projections, modelling repayment capacity and checking whether your structure remains fit for purpose before applying for finance.
The consultation period is due to close on 10 July 2026, so final details may still shift. Business owners should treat the announcement as a planning prompt rather than a green light to borrow. Speaking with tax professionals, accountants and finance specialists can help clarify how the rules may apply to your circumstances. It may also be timely to compare funding options and discuss your scenario with experienced brokers or advisers before committing to a new facility.
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The jump from $2m to $10m turnover sounds pretty significant, but I’d be curious how much weight lenders will actually give it when cash flow is still the main thing they care about. For a lot of small operators, it feels more like a planning benefit than something that’ll move the needle on approval straight away.
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The jump from $2m to $10m turnover sounds pretty significant, but I’d be curious how much weight lenders will actually give it when cash flow is still the main thing they care about. For a lot of small operators, it feels more like a planning benefit than something that’ll move the needle on approval straight away.