Labor is reshaping the R&D tax incentive programme and widening access to venture capital incentives to better target so‑called young, growing firms. A year‑long review led for the government by Tesla chair Robyn Denholm found support had become too diffuse.
A new national body to coordinate R&D spending sits at the centre of the reforms. It is intended to create a clearer pipeline for startups to become larger companies in Australia.
Officials frame the plan as a shift from broad subsidies to more deliberate backing of early‑stage innovators.
Under the proposal, changes to the R&D tax incentive would apply from the 2028‑29 financial year and significantly tighten eligibility. Support would focus on core R&D activities undertaken by small businesses less than 10 years old rather than older or more loosely defined claimants.
Treasury estimates the narrower design will save the budget around $650 million, a meaningful fiscal consolidation. Venture capital incentives are set to be expanded alongside these cuts, aimed at channelling private capital into the same cohort of high‑growth firms.
Startup groups are being consulted intensively as the package is finalised because it lands amid heightened concern over capital gains tax. Founders often rely on equity and stock options as primary compensation so the end of the capital gains tax discount could reduce the payoff for scaling from Australia.
Policy advisers argue that richer venture capital concessions and more focused R&D support could offset some of that hit. The balance between budget savings and sustained startup growth now sits at the core of Labor’s innovation strategy.
