Liberal MP Andrew Hastie said the Australian Labor government's proposed capital gains tax carve-outs will create bureaucracy and harm small-business entrepreneurs.

The dispute centers on the government's plan to replace the current 50% capital gains tax discount [1] with an inflation-adjusted model. This change affects the financial planning of nearly three million small businesses in Australia [2], leading to a clash over how to protect smaller firms from the tax increase.

Hastie said the government's approach during a series of discussions following policy consultations in May 2026. He said the government is attempting to minimize damage through these carve-outs, but argued the result is an increase in red tape.

"They’re trying to minimise the damage now, which is why they’ve come up with carve‑outs," Hastie said. "But all they're doing is adding layers of bureaucracy to small businesses. We believe they are the engine room of the Australian economy."

Treasurer Jim Chalmers and Prime Minister Anthony Albanese have faced questions regarding the execution of the move. While the government maintains that the carve-outs are narrowly targeted, opposition figures and some entrepreneurs have called for a full reset of the policy. Critics argue that the limited nature of the exemptions fails to provide sufficient relief for those driving economic growth.

Reports from ABC News indicate that the government has entered a consultation phase to refine these carve-outs. However, the opposition continues to describe the move as hamfisted, suggesting that the administrative burden of qualifying for exemptions outweighs the benefits for the average small business owner.

“They’re trying to minimise the damage now, which is why they’ve come up with carve‑outs.”

The tension reflects a fundamental disagreement over tax equity versus economic incentive. While the Labor government seeks to modernize the tax system by adjusting for inflation, the opposition is framing the resulting administrative complexity as a barrier to entrepreneurship, potentially influencing future policy adjustments to avoid alienating the small-business sector.