Labor considers startup CGT carve

The federal government is said to be considering a startup-specific carve-out from its controversial capital gains tax (CGT) overhaul. This follows weeks of backlash from founders, investors and VC groups who have argued the changes could damage Australia’s innovation ecosystem.

Under the proposed changes, the current 50% CGT discount for assets held longer than 12 months would be replaced with a cost-base indexation model, alongside a proposed 30% minimum tax on net capital gains.

According to the Sydney Morning Herald (SMH), Treasurer Jim Chalmers is examining options that could allow qualifying startups to continue accessing the existing 50% CGT discount or a concession closer to the current arrangements, rather than moving entirely to Labor’s proposed inflation-indexed model.

Ministers are still reportedly working through how any startup concession could be structured, including the challenge of defining what qualifies as an innovative startup for tax purposes.

Existing eligibility frameworks used for startup incentive programs and employee share scheme concessions are said to be among the options being considered.

The government is also examining broader amendments to the package, including expanding existing small business CGT concessions beyond businesses with annual turnover of $2 million, as well as planned reforms affecting trusts.

This development arose on the same day submissions closed for a Senate inquiry examining the reforms, with startup founders, investors and industry groups among those making representations to the committee.

Public hearings are scheduled for June 15 and 16 ahead of a final report due on June 19.

Continued startup backlash against CGT changes

The startup sector has been one of the most vocal critics of Labor’s proposed tax overhaul since it was unveiled in the federal budget.

Labor reportedly had anticipated opposition from property investors but was caught off guard by the scale of the backlash from startup founders, investors and technology workers.

Founders and investors have argued the changes could disproportionately affect startups because equity is often used to attract talent and investment, while successful startups can generate gains that far outpace inflation.

Critics have also warned the reforms could reduce the appeal of employee share schemes and encourage founders to establish businesses overseas.

The government had already acknowledged those concerns in the budget papers. It committed to consult on “the interaction of the capital gains tax reforms and incentives for investment in early-stage and start-up businesses” ahead of the proposed July 2027 start date.

Since then, founder groups, investors and startup advocates have mounted a coordinated campaign against the changes.

The campaign has included petitions, public advocacy efforts, and the aforementioned submissions to the Senate inquiry.

This has included an open letter from founders to Anthony Albanese, as well as a Coalition-backed #StopTheTechTax campaign that coincided with a vow to axe Labor’s tax changes if elected.

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