Treasurer Jim Chalmers wants to keep founders and venture investors onside after announcing in the federal budget that the 50% capital gains tax discount will be removed across all asset classes, including start-up equity. Leading technology founders are pushing for an explicit exemption for start-ups, arguing the change would push a generation of entrepreneurs overseas.
Government figures downplay a full carve-out, indicating alternative forms of support may be preferred instead. Budget papers flag a consultation process that recognises “the unique features of the tech and start-up sector” and the final design is still fluid.
Tech leaders, including senior figures linked to the Tech Council of Australia, campaigned ahead of the budget against scrapping the long-standing Howard-era CGT discount without special treatment for high-growth companies. The government instead proposes moving to an inflation-linked capital gains model with a 30% minimum tax rate, which founders say erodes the upside that compensates for start-up risk.
In parliament, the treasurer acknowledges more policy work is needed and tells colleagues the government has not finished refining the new framework. Debate now centres on whether targeted relief for founder and staff equity is possible without unravelling the broader integrity goals behind the reform.
Start-up advocates argue that if equity upside shrinks, Australia risks losing not only founders but also skilled employees who accept lower salaries in exchange for shares. Venture capital funds warn they may redirect capital to jurisdictions with more favourable exit tax treatment, which could slow the local funding pipeline.
The government is walking a tightrope between protecting revenue, lifting system integrity and keeping the domestic innovation ecosystem globally competitive. Policy negotiations over the coming months are likely to determine whether Australia can keep its most ambitious tech companies at home.
Canberra is tightening generous R&D tax breaks even as it promises stronger backing for “young, growing firms” through revamped venture capital incentives.
The Albanese government is responding to a year-long review of innovation settings by Tesla chair Robyn Denholm and is adopting recommendations that reshape the popular R&D tax incentive programme while broadening venture capital tax support. A new national body to coordinate R&D spending is planned and aims to make it easier for promising start-ups to scale into larger Australian-based companies rather than relocating.
These moves arrive while the government is in intense talks with the start-up sector over the planned end of the 50% capital gains tax discount, a change founders say could weaken equity-based pay. Tension is emerging between targeted innovation support and broader tax integrity measures that may blunt the appeal of building from Australia.
Changes to the R&D tax incentive kick in from 2028-29 and are projected to save the budget $650 million as eligibility rules are narrowed. Support will focus more tightly on core R&D activities conducted by small businesses less than 10 years old rather than a wide range of projects by older firms.
Officials argue this sharper targeting should direct scarce public money to genuinely experimental work that drives new products and capabilities. Start-ups, however, are watching closely to see whether the tighter rules still accommodate the messy trial-and-error common in early-stage tech development.
Expanded venture capital incentives are designed to complement the narrower R&D tax breaks by attracting more private risk capital into young companies. Policymakers hope that by combining a leaner, better-targeted R&D programme with more generous investment-side incentives, the ecosystem can still support ambitious local firms even as broader tax concessions are wound back.
Industry groups are now scrutinising the detail to judge whether the package improves the pipeline from early R&D to scale-up or merely shifts the mix of support.
