The treasurer has hit out at "misinformation" fuelling a backlash against the government's budget tax changes.
Jim Chalmers has been forced onto the defensive by a growing campaign, led by young startup founders, who claim Labor's move to pare back the 50 per cent capital gains discount will effectively double their tax bill when they sell their companies.
"By removing the CGT discount on shares, and replacing it with a cost base indexation scheme, you have clocked us with a massive tax hit and then come up with a replacement that will make things even worse," 40 business owners under 40 said in an open letter to the prime minister.
"Rather than back us, you have ambushed us with a massive tax increase, a tax that will hit us, the Australians we hire, and the investors who believe in us, the hardest."
The criticisms ignored the fact small businesses would still be able to access four existing concessions and carve-outs, Dr Chalmers said.
"People who want to, like our political opponents, want to make up things about our changes, they don't acknowledge that, but they should," he told reporters on Wednesday.
Jumping on the bandwagon against the changes was Shadow Treasurer Tim Wilson.
He pointed to the example of a teenage girl, Sienna, who set up a skincare company at age 12, in an "inspiring display of Aussie ingenuity and dash", but claimed she would have to share half the reward for her effort with the government.
"She is very concerned, as many Australians are, that their hard work, savings and sacrifice, and everything they have put into it, could, depending on the exit strategy and price, could ultimately face up to 47 per cent tax," he told the National Press Club.
Because her starting cost base was near zero, the new indexation method would provide her effectively no discount on the capital gains tax she would have to pay if she sold her business, Mr Wilson said.
If her income tax for that year was above the highest tax bracket of $190,000, that would mean a tax rate of 47 per cent.
But unless her business had an annual turnover of more than $2 million or more than $6 million in assets, she would still be eligible for small business CGT concessions, including the 50 per cent active asset discount.
"The one example that Tim Wilson began his speech with, he was asked, 'could this person pay less tax under these new arrangements', and his answer was essentially maybe," Dr Chalmers said.
The treasurer said the government was still consulting with the sector to ensure the changes don't negatively impact startups, which are viewed as vital to improving Australia's sluggish productivity growth.
Government modelling suggested the average tax rate on capital gains would increase only modestly, from 19.3 per cent to 21.4 per cent, Monash University corporate tax expert Tamara Wilkinson said.
Describing the budget as an "assault on aspiration" was an overstatement, she said.Â
"For the business sector, the budget balances these changes with generous measures like loss refundability, permanent instant asset write-offs, and expanded R&D incentives," she said.
"Ultimately, while the tax landscape is shifting, the fundamental opportunities for Australians to save, start businesses, and build wealth over time remain largely intact."
Prime Minister Anthony Albanese said the campaign against the changes was being run by "right-wing parties and their allies" and few small businesses would be impacted by the changes.