Budget 2026 lifts R&D cap to $250m, startups warn CGT changes undermine it

Treasurer Jim Chalmers will raise the R&D tax incentive cap from $150m to around $250m in next week's federal budget, according to reporting from the Australian Financial Review. The move stops short of the Robyn Denholm-led Ambitious Australia review, which recommended scrapping the cap entirely.

The change primarily benefits larger R&D operations. Most startups claim well below $150m in eligible expenses. But the R&D boost sits alongside rumoured capital gains tax reforms that have early-stage founders concerned about equity comp structures and exit planning.

Why sales teams should care

Startup equity packages rely on favourable CGT treatment. If the discount on capital gains drops from 50% to something lower, OTE calculations change for anyone holding options or founder shares. That affects:

• AEs considering startup offers with lower base, higher equity
• Sales leaders evaluating VP roles at growth-stage companies
• Founders selling businesses (and whether they reinvest in their next venture)

The R&D tax incentive matters less directly to sales, but it signals which companies have cash flow for hiring. R&D credits are refundable for startups under $20m turnover, meaning actual cash back. More R&D runway often means more go-to-market budget 12-18 months out.

The context

Australia's business R&D spending has declined over the past decade. Ireland just lifted its R&D credit to 35% in their Budget 2026. The US restored immediate expensing for domestic R&D costs. Global competition for innovation investment is real.

But if CGT changes make startup exits less attractive, founders may think twice about building here. That is the tension: boost innovation support while potentially reducing the reward for successful exits.

What we are watching

Budget details drop next week. The CGT changes remain unconfirmed, but speculation is widespread enough that startup groups are already pushing back. If the reforms hit equity compensation tax treatment, expect comp structures to shift, particularly at early-stage companies relying on options to compete for talent.

Worth noting: R&D tax incentive claims require detailed documentation. If you are in sales at a company claiming the credit, your CRM data on product development feedback loops might be part of that documentation. Just FYI.