All of Australia’s 2.7m small businesses will receive “generous” exemptions from capital gains tax, as Anthony Albanese flagged startups and testamentary trusts would receive carve outs from the government’s contentious tax reforms.

The prime minister’s announcement on Thursday follows weeks of sustained criticism from industry groups, who have labelled the move from a flat 50% CGT discount model to an inflation-linked approach as a “tax on growth”.

In particular, there have been concerns that entrepreneurs could be particularly harshly treated under the proposed tax reforms, and that it would hike taxes on small firms which did not meet the $2m turnover threshold to qualify for existing CGT concessions.

Jim Chalmers said the annual turnover threshold would be increased to $10m, putting it in line with how small businesses were defined elsewhere in the system.

The treasurer said 98% of all active businesses in the country would receive CGT concessions under amendments in the “primary” legislation that is before the Senate.

“There are four existing concessions for businesses in the CGT system. We’re leaving all four in place, but we’re making one of them substantially broader and significantly more generous at the same time.”

The planned amendments would cost the budget $475m over the budget forward estimates, the treasurer said.

“To put that into context, the negative gearing, capital gains and trust changes are expected to raise about $8.1bn over the course of the forward estimates.”

A Treasury paper released on Thursday set out the government’s “preferred position” on the flagged CGT carve outs for startups, and invited feedback over the coming weeks.

“We do consider there to be a special case for businesses with low or no start-up costs, and that necessitates this different treatment in the tax system,” Chalmers said.

The government also announced that testamentary trusts used to manage the distribution of income from deceased estates would be exempted from the planned 30% minimum tax on discretionary trusts.

Chalmers said further details around the carve out for trusts would be in a forthcoming consultation paper, and that any amendments would not be part of the “first tranche” of legislation before the Senate.