Treasury softens startup CGT exemption after backlash
The Albanese government released draft legislation for its Innovative Business CGT Concession on 11 September, backing away from several contentious elements after startup and VC pushback.
Key changes from the earlier proposal:
- Holding period cut to 3 years (down from 5)
- $10 million lifetime cap removed entirely
- Company eligibility extended to 15 years (up from 10, with biotech/medtech in mind)
- $50 million turnover test remains
- Innovation criteria unchanged (using existing Early Stage Innovation Company benchmarks)
Submissions on the draft close 28 September. Treasury is still shaping the final law based on feedback.
What it covers
The concession applies to founders, early employees with equity comp, and investors in unlisted, independent startups that meet innovation and growth criteria. The goal: protect these cohorts from the broader CGT overhaul replacing the 50% discount with cost-base indexation and a 30% minimum tax from 1 July 2027.
Eligibility targets venture-backed firms and founder-led businesses under $50 million turnover. For sales professionals: this matters most if you are at a startup using ESS to recruit, or advising portfolio companies on comp strategy.
Why the government moved
The original CGT changes passed in May triggered fierce backlash from founders, VCs, and startup groups who argued the reform would kill angel investment and push talent offshore. The IBCC is the government's attempt to carve out high-growth businesses without opening a blanket exemption.
Practical impact sits with the startup services stack: venture capital, tax advisory, ESS administration, recruitment firms packaging equity offers. If you are selling into early-stage tech or managing comp at a VC-backed business, watch this space. The final law dictates how attractive equity looks versus cash.
Treasury's draft is at consult.treasury.gov.au. Submissions close late September.