Federal Budget 2026 cuts red tape and makes the $20,000 asset write-off permanent, but new capital gains and trust tax reforms have sparked concern among small businesses and fintech firms.
The Council of Small Business Organisations Australia says the Federal Budget delivers some encouraging measures to support productivity and reduce regulatory burden, but also raises serious concerns about the impact of proposed tax changes on many small business owners.
COSBOA CEO Skye Cappuccio said measures aimed at simplifying compliance, improving harmonisation and supporting investment were welcome at a time when small businesses remain under significant economic pressure.
“Small businesses are looking for certainty, simplicity and practical support to help them manage the cumulative pressures of fuel, energy, insurance, wages, rent, freight and compliance costs,” Cappuccio said.
“There are some encouraging signs in this Budget that recognise the need to improve the operating environment for small business and reduce friction across the economy.”
COSBOA welcomed the Government’s commitment to making the $20,000 instant asset write-off permanent from 1 July 2026, progressing the tell us once principle across government agencies and regulators, harmonising payroll tax and licensing arrangements across state and territory borders, streamlining secure access to government services through Digital ID, and reducing regulatory burden by $10.2 billion annually in compliance costs.
The organisation also acknowledged measures designed to support small business through the tax system, including the proposed $250 tax offset for workers and sole traders, loss carry-back arrangements for companies, and support for startup businesses in their early years.
A Productivity Commission inquiry into regulatory barriers impacting business dynamism was also welcomed.
However, COSBOA expressed serious concern regarding the complexity and potential unintended consequences of proposed tax changes, including changes to the capital gains tax discount calculation, the introduction of a minimum 30 per cent tax on capital gains after 1 July 2027, the application of a 30 per cent minimum tax rate to trust distributions after 1 July 2028, and delays to the delivery of the proposed $250 tax offset.
“The proposed changes to capital gains tax and the taxation of trusts have the potential to significantly disrupt the retirement plans of many small business owners,” Cappuccio said.
“For many Australians, their business is their retirement asset. Changes that reduce the value of business sale proceeds or associated property holdings could have major long-term consequences for owners who have spent decades building their businesses.”
Cappuccio said COSBOA was calling on the Government to undertake extensive consultation with the small business sector before implementing the proposed reforms.
“Small business needs fairness in the tax system, but it also needs stability, certainty and simplicity,” she said.
“We are urging the Government to work closely with stakeholders to prevent unintended consequences and ensure these reforms are workable in practice.”
COSBOA also called on the Government to consider a specific carve-out for small business trusts and provide support to help business owners access appropriate advice and understand the implications of the proposed changes.
“Many small businesses will require professional advice to fully assess the impact of these measures, and government should assist businesses to navigate what are substantial and complex changes,” Cappuccio said.
The federal government will scrap the 50 per cent capital gains tax discount, reverting to an inflation-based tax model and introducing a new minimum 30 per cent tax rate for realised gains. Key concessions for small businesses remain in place, and investors in new housing builds will be free to choose from both the old and new CGT systems.
The CGT reforms will only apply to gains arising after 1 July 2027. Assets acquired after Budget night face the existing 50 per cent CGT discount until July 1, 2027, whilst assets bought after July 1, 2027 will face the inflation model, which is expected to only tax the real profits made once the asset is sold.
The four existing small business concessions under CGT rules, helping entrepreneurs avoid major CGT hits when they retire, or roll over the gains on an asset into a replacement asset, will stay in place.
FinTech Australia warned that uncertainty around government’s proposed capital gains tax reforms will have an immediate impact on startups’ access to funding, and risk pushing founders, capital and talent offshore.
FinTech Australia CEO Rehan D’Almeida said the proposed CGT changes could significantly undermine Australia’s startup and fintech ecosystem if not carefully redesigned.
“These proposed changes risk materially weakening the incentives that underpin startup formation and early-stage investment in Australia,” D’Almeida said.
“The startup ecosystem depends on individuals taking extraordinary levels of financial and career risk. Founders often spend years building businesses without stable income, investors deploy capital into extremely high-risk ventures, and early employees accept lower cash salaries in exchange for equity upside.”
“In a highly competitive global market for technology talent, employee share ownership plans are one of the few mechanisms startups have available to attract and retain highly skilled employees. Weakening the long-term value of equity participation risks making Australian startups less globally competitive.”
“There is a real risk these changes push capital, talent and ideas offshore.”
D’Almeida said the fintech sector supported Federal Budget measures including expanded venture capital incentives, support for Digital ID, continued funding for the Consumer Data Right, and the proposed reinstatement of business loss carry-back arrangements.
FinTech Australia welcomed CDR funding, including work exploring incorporation of ATO tax data into the regime to support lending and verification use cases, major Digital ID funding supporting onboarding, fraud reduction and digital verification across financial services, expansion of VCLP and ESVCLP settings improving access to growth capital for scaling fintechs, and carry-back and startup loss refundability reforms improving cash flow for startups investing heavily in growth and compliance.
Better Regulation Roadmap commitments from ASIC, APRA, AUSTRAC and the RBA to simplify reporting, reduce duplication and support payments innovation were also welcomed, along with RDTI increases to the maximum expenditure ceiling from $150 million to $200 million, regulatory sandbox reforms to the enhanced regulatory sandbox, continued work on payments reform including implementation of the Strategic Plan for Australia’s Payments System, continued work on tokenisation, digital money and payments infrastructure modernisation, and commitments to cut red tape.
However, FinTech Australia raised concerns regarding proposed CGT reforms, which risk weakening incentives for founders, early-stage investors and startup employees who rely on long-term equity upside and ESOP participation to justify significant financial and career risk.
The Government has flagged it will consult with early-stage and startup businesses to explore concerns around its impact on the tech and startup sectors.
FinTech Australia is also concerned by the RDTI threshold increase from $20,000 to $50,000, which risks excluding smaller startups and emerging fintechs from accessing early-stage innovation support, and removal of supporting activities from eligible R&D expenditure for the RDTI, which is particularly problematic for fintechs whose innovation activities often involve embedded compliance systems, software infrastructure, data experimentation and iterative product development that do not always fit neatly within traditional R&D definitions.
“We are concerned by proposals to remove supporting activities from eligible R&D expenditure and to increase the minimum claim threshold from $20,000 to $50,000,” D’Almeida said.
“Fintech innovation often involves software development, compliance infrastructure, data systems and embedded experimentation that do not always fit neatly within traditional definitions of R&D.”
“There is a real risk that some legitimate fintech R&D activity may no longer qualify, particularly for smaller startups and emerging firms.”
“Combined with the higher minimum threshold, these changes could see a number of smaller fintechs miss out on support altogether at precisely the stage where early innovation support matters most.”
FinTech Australia welcomed the Government’s proposed expansion of the Venture Capital Limited Partnership and Early Stage Venture Capital Limited Partnership regimes, including increases to fund and investee thresholds.
“These reforms are a positive step and reflect the reality that many Australian technology businesses require larger and longer-term pools of growth capital than existing settings were designed for,” D’Almeida said.
“However, fintech businesses have historically faced unique challenges under some venture capital structures because they often operate in compliance-intensive and regulated business models that do not fit neatly within existing eligibility frameworks.”
FinTech Australia said continued reform was needed to ensure venture capital settings properly support software-led, compliance-embedded and regulated innovation.
FinTech Australia welcomed the plan to reinstate and expand loss carry-back arrangements for businesses and startups.
“Carry-back is one of the most cash-flow effective policy levers available to scaling startups,” D’Almeida said.
“Fintechs often cycle between profit and loss years as they invest heavily in growth, compliance, product development and talent. Measures that improve cash flow and support reinvestment are critically important.”
FinTech Australia also welcomed continued funding for Digital ID and the Consumer Data Right, including exploration of expanded access to government-held data through the CDR framework.
“These systems are foundational digital infrastructure for the future economy,” D’Almeida said.
“However, unlocking their full economic value will require stable long-term funding, practical implementation and continued focus on reducing unnecessary compliance friction.”
FinTech Australia noted the concurrent release of the Council of Financial Regulators’ Better Regulation Roadmap implementation plan, which includes commitments from ASIC, APRA, AUSTRAC, the ACCC and the RBA relating to payments reform, CDR, AML/CTF simplification, digital reporting, tokenisation, bank licensing and reducing regulatory burden for fintechs and smaller firms.
“The broader direction toward more coordinated, technology-enabled and proportionate regulation is welcome,” D’Almeida said.
“However, the fintech sector is simultaneously navigating a very large pipeline of reforms across payments, digital assets, AML/CTF, scams, AI, Digital ID and open banking.”
“Ensuring these reforms are properly sequenced and practically implementable will be critical.”
According to Deloitte Access Economics research commissioned by FinTech Australia, the fintech sector currently contributes $13.6 billion in direct value added to the Australian economy and supports more than 109,000 jobs nationally. With the right policy settings, the sector could contribute up to $37 billion to GDP by 2035.
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