The recent Australian federal budget introduced significant reforms to capital gains tax (CGT), sparking debate about the potential impact on investors and small businesses.Contrary to sensational claims, the 50% CGT discount has not been scrapped but replaced with an inflation-adjusted approach.

This means investors will pay tax on 'real' gains rather than nominal gains, potentially paying more or less than before depending on the inflation and return rates.Existing investments held before mid-2027 will retain the 50% discount, while new gains will adopt the new system.

Small businesses with turnover under $2 million or assets under $6 million continue to qualify for CGT concessions, so most will not face significant new tax liabilities.

Start-ups with minimal initial investment may see higher effective rates on eventual sales, but claims that the government will take 47% of profits are misleading, as they misunderstand how the discount is applied.Negative gearing remains available for investors in new builds, mitigating potential increases in rent, though small rises could occur.

Overall, the reforms aim to make the CGT system fairer without drastically harming entrepreneurship or existing investors, and legislation is still subject to parliamentary approval, meaning the final rules could differ from the budget announcement.