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CGT changes a step in the right direction, but key gaps and uneven reforms remain
Content Summary
- Threshold increase applies to only one of the four small business CGT concessions, raising consistency and complexity concerns
- Further analysis needed, still so much uncertainty for accounting professionals
- Excluding discretionary testamentary trust from minimum tax is ‘sensible’.
CPA Australia says today’s changes to capital gains tax (CGT) and trust taxation are a constructive step forward, but critical design questions remain unresolved, with potential implications for small businesses and advisers.
Tax Lead Jenny Wong said the announcements by the Prime Minister and Treasurer broadly respond to industry concerns and are “heading in the right direction”, particularly at a time when small businesses are facing sustained cost pressures and economic uncertainty.
CPA Australia has welcomed the proposed increase in the eligibility threshold for the 50 per cent active asset CGT reduction from $2 million to $10 million.
“These are generally positive announcements by the Prime Minister and Treasurer Jim Chalmers. Lifting the threshold for the active asset reduction is a significant and welcome change that should allow more small and medium-sized businesses to benefit from that CGT concession,” Ms Wong said.
However, CPA Australia cautioned that limiting the threshold increase to only one of the four small business CGT concessions raises concerns about consistency and complexity.
“Further analysis is needed to understand why the government has chosen not to increase the thresholds for the other three CGT concessions.
“Applying different eligibility thresholds across concessions risks creating confusion, additional compliance checks and unintended inequities, where a business may qualify for one concession but not others.”
CPA Australia also welcomed the Treasurer’s indication that ministerial discretions will be reduced in the revised CGT framework, noting that excessive reliance on discretion creates uncertainty for taxpayers and advisers.
“The inclusion of multiple ministerial discretions in the Bill before parliament added unnecessary uncertainty, particularly around definitions that should be clearly set out in primary legislation – such as what constitutes a new residential build, the simplified apportionment methodology and which asset classes qualify for the 50 per cent CGT discount,” Ms Wong said.
The organisation said the proposed tax concession for innovative start-ups are narrowly defined which potentially leaves the owners of many high potential businesses still exposed.
“Access to the innovation concession is restricted to a tightly defined group of start-ups, so the reality is that other high-growth, innovative businesses will be excluded from support.”
CPA Australia also backed the government’s decision to exclude discretionary testamentary trusts from the proposed minimum tax on trusts, describing it as a “sensible refinement”.
“Exempting testamentary trusts provides greater certainty for estate planning and ensures families retain flexibility to manage assets and support dependants following the death of a loved one.”
Ms Wong said the announcements reflect the government’s responsiveness to stakeholder feedback, including CPA Australia’s submission on the Federal Budget and recent evidence to the Senate Economics Legislation Committee.
However, she stressed that significant design and implementation issues remain unresolved, particularly in the draft legislation.
CPA Australia has identified other key concerns, including:
- the absence of critical legislative detail defining who is taxed, at what rate, and on which assets;
- gaps in how the new CGT rules interact with existing frameworks, including deceased estates, CGT rollovers and private company transactions; and
- substantial compliance burdens for taxpayers and their advisers.
“These are not minor technical issues – they go to how the system will operate in practice,” Ms Wong said.
“Without greater clarity, there is a risk of increased compliance costs and uncertainty for business and their advisers.”
CPA Australia is also calling on Treasury to publish its compliance cost methodology to ensure transparency and enable proper scrutiny of the reforms’ real-world impact.
Ms Wong said continued consultation will be critical to ensure the reforms deliver equitable and workable outcomes.
“We acknowledge the government’s willingness to refine its approach and respond to feedback. The next step is to ensure the final design is coherent, consistent and practical to implement.”
“Accountants and tax agents will be expected to guide clients through what assets are captured, what records are needed, and how to obtain defensible valuations,” Ms Wong said.
The influx of client inquiries could be significant as the 2027 deadline approaches.
“We are likely to see a wave of Australians contacting their accountants asking: ‘Do I need to value this? What is it worth? How do I prove it?’,” Ms Wong said.
“Without clear rules and guidance, this will create bottlenecks, delays and increased compliance costs across the system, adding layers of complexity, judgement and potential risk.”
CPA Australia warns that accountants may also face increased professional risk if valuations are challenged by the ATO.
“Tax practitioners will be placed in a difficult position, balancing client expectations, unclear definitions, and the need for defensible valuations. That is a significant additional burden on the profession,” Ms Wong said.
Formal valuations can cost hundreds of dollars per item, meaning households with collections of jewellery, artwork, watches or coins could face thousands of dollars in upfront costs.
CPA Australia estimates the total one-off transitional valuation burden at between $675 million and $825 million, a figure that was not disclosed by Treasury.
“This is a substantial, economy-wide compliance exercise, and much of it will be facilitated through accountants,” Ms Wong said.
CPA Australia has also identified concerns with the proposed split-gain mechanism, which could result in taxpayers being taxed on more than their actual economic gain.
"For a personal use asset, any capital loss on disposal is entirely disregarded under existing tax law. But this Bill splits a single asset's history into two separate tax events — one before 1 July 2027, one after. If the asset's value falls before that date and recovers afterwards, the loss on the first event is ignored while the gain on the second remains fully taxable. That creates a real risk that taxpayers end up paying tax on more than they actually made," Ms Wong said
CPA Australia is calling on the Government to clarify the scope of the reforms and better consider their practical impact.
“The Treasurer has said this reform targets property speculators and high-income investors, but in reality it places new obligations on every Australian holding CGT assets – and on the accountants who support them. Without clearer guidance and simplification, the compliance burden on both taxpayers and the profession risks being significant and unfair.”
Media contact
Adrienne Biscontin
External Affairs Lead
[email protected]
0429 009 691