Fintech census puts Canberra’s startup tax debate to the test

Australia’s fintech sector is maturing, but its latest annual census poses a challenge for Canberra: tax concessions alone can’not’t turn promising startups into sustainable businesses.

The 2026 Fintech Annual Census, a collaboration between RSM and FinTech Australia, recently surveyed 135 fintech businesses. Nearly half (47%) were profitable, while 66% generated more than $1 million in annual revenue.

Two-third (67%) were primarily selling to other businesses and an impressive 59% are planning to up their headcount, demonstrating that fintech’s economic contribution goes beyond another payments app.

But AI is the magic bullet many of its proponents espouse when it comes to fintech founders. While 94% plan to invest in it, the census didn’t dive into whether or how firms measure AI returns, but the interviews suggest uneven gains, although some said AI helped them retain experienced developers in Australia.

Funding narrows

Meanwhile the funding channel is narrow. Of the $1.7 billion invested in Australian fintech in FY26, 91% went to the 10 biggest deals, according to analysis by Triple Bubble and Cut Through Venture – and Airwallex alone gobbled up more than half of that capital.  

“It’s probably the most dampened I’ve ever seen the market,” one participant told the census.

The anecdotes in the report sum up the challenges with one founder observing that being profitable provides “three months a year that I can basically put back into growing the business instead of trying to capital raise.”

Another said board meetings are dominated by “discussions around capital, preserving capital, capital raising rather than what do we need to be doing on the business to make money and be a viable business in the future.”

But there’s another layer complicating that picture – 59% of the census respondents weren’t actively seeking investment (34% overall, 55% of profitable fintechs) – so the capital squeeze falls most heavily on fintechs trying to grow towards profitability. And just 9% of fintechs are seeking their first raise.

More than 70% of pre-revenue and pre-profit fintechs report difficulty raising capital, while 83% of not-yet-profitable respondents have raised previously. That implies the problem goes beyond initial backing to finding the follow-on funding to reach sustainable cash flow.

More than 80% of 36 respondents pursuing investment expected to close within six months, although those are expectations rather than completed deals. The political risk is that uncertainty around CGT and R&D support adds another complication for startups navigating a highly selective funding market.

Founder money remains the most common funding source, used by 72%, compared with 24% receiving venture capital. That alone has serious political implications in light of the governments tax reforms and their impact on the startup sector.

Policy issues

With their own money at risk to build a fintech, 61% of respondents said retaining the 50% capital gains tax (CGT) discount would benefit their business, while 56% were concerned about changes to the Research and Development Tax Incentive RDTI) – although the survey predates September’s revised Innovative Business CGT Concession draft, which extended the proposed eligibility window to 15 years, cut the minimum holding period for equity to three years and removed the proposed lifetime cap.

FinTech Australia still argues the eligibility rules are too complex to give founders, investors and employees confidence.

As CEO Rehan D’Almeida puts it in the report, “a tax incentive wrapped in uncertainty is not much of an incentive.”

The RDTI debate reaches directly into development budgets. From July 2028, the Labor government proposes removing supporting R&D activities from eligibility and generally limiting refundable offsets to firms under 10-years-old, with increased support for eligible core research as the trade off.

Put simply, that means that as Australian fintech reaches a maturity that has the potential to give the sector globally competitive momentum, getting older could narrow access to refundable R&D support.

And as the report notes: ” as the only government program with wide uptake within fintech [50% use it], the proposed changes to the RDTI provoke strong sentiments from industry leaders”.

However the census challenges the notion of a tax-driven exodus, with tax settings ranking well below regulatory certainty and market size as influences on international expansion.

Nonetheless, four in 10 fintechs (39%) are generating revenue from overseas, although just 18% described it as significant, with Australia remaining the primary market for 96% of the cohort.

South East Asia is emerging as a significant growth opportunity, with 46% ranking the region, including Singapore, among their top three target markets. Other top expansion markets include the UK (51%), USA (48%) and New Zealand (41%). 

But the challenge, especially in light of comments this week by innovation minister Tim Ayres about the importance of big business to lift productivity and innovation, so smaller companies can follow in their wake, is that the pace of change is glacial. Roundtable participants described bank sales requiring years of relationship-building, while government procurement processes favoured established providers and large consultancies.

The report’s practical requests include shorter procurement pathways, more pilots and tender requirements that give smaller providers a fair chance.

Unseen impacts

One industry leader summed up the sector’s relationship with Canberra thus: “The challenge is not that regulators want fintechs to fail; the challenge is that regulators often don’t have a view on fintech at all.”

The issue for fintechs is they don’t object to being regulated – what upsets them is the lack of consideration for how those regulations will impact the fintech sector.

Their view is that policy settings are typically designed for banks and other large institutions, leaving fintech to absorb what may be unintended consequences.

They see a gap between how regulators explain new requirements and how legal advisers interpret them. That uncertainty leads to a kind of paralysis, with entrepreneurs hesitant to innovate for fear a regulator later rules them offside.

One founder says entrepreneurs are spending more time interpreting compliance obligations than developing new products, pushing the industry into what they describe as “a slightly less ambitious space overall.” 

So it’s no surprise that 53% of respondents said regulation either strongly or somewhat inhibits growth.

On a key issue, the Consumer Data Right (CDR), 54% said it reform is too slow and not keeping pace with industry needs and innovation.

FinTech Australia chair Sarah Gorman said said the Census reveals a generation of businesses generating meaningful revenue, creating jobs, and competing internationally.

“But we’re also seeing a sector operating at two speeds, with a concerning gap between established players and the next wave of innovators, navigating an increasingly complex policy environment and growing pressure on capital from changes to CGT and the RDTI,” she said

“We need policy and regulatory settings that allow innovation to thrive, attract talent and investment, and support the full journey from startup to scale up and successful exit and returns to investors. That flywheel is how we build a stronger domestic fintech sector, compete internationally and attract the next wave of capital and innovation into Australia”.

For a government promoting productivity, the Fintech Census suggests there’s more work for government beyond rewriting tax rules. Clearer regulation and a credible path to winning customers could help improve fintech viability amid its current funding squeeze.

The full FinTech Annual Census 2026 is here.