Western Australian small businesses are bracing for a significant financial impact as new state-level capital gains tax (CGT) changes compound existing federal tax rules, creating a potential double blow for business owners.
Understanding the New State Rules
The Western Australian government has introduced modifications to its CGT framework that will affect how small businesses calculate and pay tax on asset sales. These changes, which came into effect on 1 July 2026, are designed to align state legislation with broader tax reforms but have created unintended complexities for business owners.
Under the new rules, small businesses that sell assets such as property or equipment may now be subject to additional state-level CGT calculations on top of federal obligations. This dual-layer taxation could increase overall tax liabilities, particularly for businesses that previously benefited from state concessions.
Key Changes and Their Impact
One of the most significant alterations is the removal of the small business CGT concession at the state level. Previously, eligible businesses could reduce their capital gains by up to 50% when selling active assets. The state government has now revoked this concession, meaning full CGT applies at the state level.
Additionally, the threshold for accessing state-level CGT relief has been tightened. Businesses with a turnover exceeding $2 million are now excluded from certain exemptions, affecting a broader range of enterprises than before.
Industry groups have expressed concern that these changes will discourage investment and business growth in Western Australia. The Chamber of Commerce and Industry WA has called for a review, arguing that the new rules place an unfair burden on small businesses already struggling with rising costs.
Federal vs State: A Complex Interaction
The interplay between federal and state CGT rules has become increasingly complex. While the federal government offers its own small business CGT concessions, these do not automatically align with state provisions. Business owners must now navigate two separate tax systems, often requiring professional advice to ensure compliance.
For example, a business selling a commercial property may qualify for a federal 50% CGT discount but still face a full state-level CGT charge. This discrepancy can lead to higher overall tax bills and unexpected liabilities.
What Business Owners Should Do
Tax experts recommend that small business owners review their asset holdings and future sale plans in light of these changes. Key steps include:
- Consulting with a tax professional to understand both federal and state obligations.
- Reassessing business structures to potentially mitigate CGT impacts.
- Considering timing of asset sales to minimise tax exposure.
The government has stated that the changes are necessary to maintain fiscal sustainability and ensure fairness across the tax system. However, many in the business community feel that the transition has been poorly communicated and implemented.
As the new rules take effect, WA small businesses will need to adapt quickly to avoid unexpected tax bills. The coming months will reveal the full extent of the impact and whether further adjustments are needed.
