Federal treasurer Jim Chalmers says legislation covering startup capital gains tax (CGT) concessions, R&D Tax Incentive changes and expanded venture capital incentives will go to parliament next week.
Chalmers used a speech on the government’s growth agenda at the Citi A50 Australian Economic Forum in Sydney today to argue its tax reforms would redirect investment towards productive businesses, while promising a bigger role for the National Reconstruction Fund in Australia’s AI industry.
“That Bill will include CGT concessions for startups, changes to the Research and Development Tax Incentive, and new venture capital incentives,” he said.
The legislation follows consultations on September’s exposure drafts, which closed late last month.
As Startup Daily reported, the government softened several contentious features of its proposed startup CGT carve-out, known as the IBCC (Innovative Business CGT Concession), after sustained criticism from founders, investors and others in the tech ecosystem.
The revised proposal cut the minimum holding period for eligible shares from five years to three, scrapped a proposed $10 million lifetime cap and extended company eligibility from 10 years to 15.
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The IBCC would retain a 50% discount for qualifying early-stage investments, subject to innovation requirements and a $50 million turnover threshold.
Whether Treasury has taken on additional startup sector feedback for the final legislation is unknown. Despite the earlier amendments, widespread concerns remained about the combined R&D and CGT changes leaving some startups and scaleups worse off, including fintechs and deep tech, potentially leading to an offshore brain drain.
As Startup Daily subsequently reported, the Tech Council of Australia argued that removing supporting R&D activities from eligible expenditure could outweigh higher offsets for core research, particularly for software, AI and deep tech startups.
It also opposed limiting the refundable offsets to businesses operating for less than 10 years, arguing quantum, robotics and space companies face lengthy commercialisation periods too.
The annual compliance requirements for startups to remain eligible under the Early Stage Venture Capital Limited Partnerships (ESVCLP) program also remain a concern, especially in terms of additional risks for investors
More research spending
Chalmers maintained today the R&D changes would generate additional research spending.
“By better targeting the Research and Development Tax Incentive, we are unlocking an extra $400 million in R&D by young firms every year,” he said.
That figure represents the government’s guesstimate of additional R&D activity, rather than any new grants allocation.
The September draft proposed introducing the R&D changes from July 2028, including a higher $50 million turnover threshold for refundable offsets and a 15-year eligibility window for qualifying therapeutic-goods research.
Separately, the venture capital proposals would lift the maximum size of ESVCLP funds from $200 million to $270 million from July 2027.
Chalmers also pointed to $3.8 billion in lower taxes for businesses, lumping the startup sector into that figure rather than pointing to any specific benefits.
Capturing AI’s value
On AI, he said Australia wanted to capture more value across the supply chain, alongside investment in data centres.
“The National Reconstruction Fund will also play a big role in helping Australia capture more of the AI value chain by building on its work in critical tech to identify and invest in Australia’s competitive advantages in these emerging industries,” Chalmers said, adding that innovation minister Tim Ayres is working with CSIRO and others “to ensure Australian researchers and innovators have the compute they need to fuel new AI businesses and breakthroughs”.
Chalmers also said AI standards would soon be introduced to parliament, arguing they would provide certainty for businesses investing in Australia.
His speech didn’t outline whether the legislation would address the startup sector’s remaining concerns about R&D eligibility and the CGT innovation requirements, or detail how founders would access the promised compute capacity.
So standby. All will be revealed next week.
And depending on the outcomes, the focus may turn to the Senate and cross-bench for the government to get its amended tax changes through.