Treasury Faces Industry Backlash Over Startup CGT Proposal
Synopsis
Fund managers, business groups and technology leaders have criticised the proposed capital gains tax changes, warning they could discourage investment in Australian startups and innovation.
Australia’s revolt against the government’s plan to reform capital gains tax (CGT) has intensified, with fund managers, founders, and business groups decrying the proposed concessions as insufficient and a blow to high-growth company investment.
The debate centers on Treasury's draft Innovative Business CGT Concession (IBCC), outlined as part of the 2026-27 Federal Budget for public feedback. Under the proposed rules, startups will retain a 50% capital gains tax discount once broader reforms to the CGT system take effect on July 1, 2027.
Under the proposed consultation paper, businesses qualifying for the concession must be unlisted, less than 10 years old, and have an annual turnover below $50 million.
The concessions would also be subject to a lifetime investment cap of A$10 million, with investors needing to hold qualifying shares for a minimum of five years. The Treasury is seeking opinions on increasing the allowable company age limit to 15 years for some sectors, including biotech, medical technology, and deep tech, which often have longer development cycles.
The wider tax overhaul will discontinue the existing 50% CGT discount, replacing it with an inflation-indexation system, and will impose a minimum 30% tax rate on capital gains, potentially climbing to 47.5% for higher earners based on income levels.
Calls grow for broader capital gains tax relief
Wilson Asset Management, a funds management firm, characterized the concession as a carve-out rather than an incentive for all investment in Australia.
The firm suggested either expanding the existing 50% discount across a broader range of companies, including listed ones on the ASX for funding, or opening the concession to all registered Australian companies and encouraging its use.
A consortium of tech entrepreneurs and business leaders argued that the proposed structure is too complex and overlooks many growing companies actively engaged in long-term investment.
They warned the measures will make Australia a less attractive market to found and invest compared to the United States and the United Kingdom, echoing the sentiment of the #StopTheTechTaxcampaign protesting the planned CGT reforms.
Instead, industry bodies advocated for an expansion of the existing small business active asset CGT concession with a higher threshold, rather than the creation of a new carve-out.
The proposed changes come amidst a global trend of governments using tax reforms to stimulate startup investment. A 2025 OECD report on government support for venture capital found that nations like the United States, the UK, and many in Europe have such policies.
In separate confirmation, Treasury stated that raising the small business active asset CGT concession from A$2 million to A$10 million would likely extend it to around 98% of all active Australian businesses, approximately 2.7 million entities.
Source: Capital Brief
Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
