Capital gains tax rarely sets pulses racing, yet for founders and the investors who back them it can quietly decide whether a young company raises its next round in Sydney or heads offshore to do it. That is why a joint letter from a dozen technology and innovation groups to the Treasurer this month is worth more attention than the dry subject matter might suggest.
The Tech Council of Australia has joined eleven other industry bodies in writing to Treasurer Jim Chalmers to call for changes to the proposed Innovative Business CGT Concession. According to the Tech Council, the signatories represent startups and scaleups spanning fintech, biotechnology, medical technology and digital health, space, robotics, agritech, climate, education and sports technology. It is an unusually broad coalition, and the breadth is part of the message: the concern is not confined to one corner of the sector.
What the concession is meant to do
The Innovative Business CGT Concession sits within a long-running effort to make Australia a better place to build and fund high-growth companies. Capital gains tax settings shape investor behaviour at every stage, from the angel who tips in early money to the venture fund weighing a follow-on, because the after-tax return is what ultimately determines where patient capital flows. A well-designed concession can tilt those calculations towards backing local innovation. A poorly designed one can add complexity without moving much money at all.
That tension is the heart of the industry response. The groups are not opposing the idea of a concession, which they broadly welcome as a signal that the government understands the role of risk capital in a productive economy. Their argument is that the proposed design, as it currently stands, risks being too narrow, too complicated, or both, and that a measure meant to unlock investment could instead leave founders and their advisers wrestling with eligibility rules that few can navigate with confidence.
The industry case for change
The coalition’s central worry is scope. Innovation in 2026 does not sit neatly inside a handful of software categories, and the list of sectors the signatories represent makes that point on its own. A biotech developing a diagnostic, a space firm building sensors and an agritech company writing paddock-management software all draw on the same pool of early-stage capital, yet definitions written with one business model in mind can inadvertently exclude the others. If the concession’s eligibility criteria are drawn tightly, the bodies argue, whole categories of genuinely innovative companies could miss out through no fault of their own.
Complexity is the second theme. Startups typically run lean, without the in-house tax teams that larger corporates take for granted, so any concession that requires expensive structuring advice to access tends to favour the well-resourced over the early and the small. The industry position, in essence, is that a concession only works if the people it is designed to help can actually use it without hiring a specialist to interpret the fine print.
There is also a competitiveness dimension. Founders and funds compare Australia’s settings with those in Singapore, the United Kingdom and the United States, and capital is mobile in a way that it was not a generation ago. The coalition’s implicit warning is that a concession which looks generous on paper but proves fiddly in practice will do little to keep ambitious companies and their investors onshore.
The other side of the ledger
The government’s caution is not hard to understand. Every tax concession has a cost to revenue, and Treasury’s job is to make sure that cost buys a real behavioural change rather than simply rewarding investment that would have happened anyway. Tight eligibility rules are often the mechanism officials reach for to contain that risk and to guard against arrangements dressed up to qualify for a break they were never meant to receive. From that vantage point, a narrow, carefully policed concession is a feature, not a bug.
Chalmers has repeatedly framed his economic agenda around lifting productivity, and innovation policy is squarely inside that story. The challenge for the government is calibration: a concession broad enough to matter to founders, yet disciplined enough to survive Treasury scrutiny and a Senate that will want to know exactly what taxpayers are getting for the forgone revenue. The industry letter is best read as an attempt to shift that balance point before the design is finalised, rather than a rejection of the policy itself.
Why it matters for Australia
This is a domestic story with national stakes. Australia has spent years worrying aloud about whether it builds enough of its own technology or merely hosts and consumes what others create, a debate that has run through much of the recent conversation about sovereign capability and data centres. Tax settings are one of the levers that actually move the needle on that question, because they influence where companies choose to scale and where the returns from a successful exit are reinvested.
The timing sharpens the point. Venture funding has been harder to come by since the boom years, later-stage capital in particular remains thin, and founders continue to weigh whether to domicile offshore. A concession that genuinely rewards early investment in Australian innovation could help keep more of that activity here, while one that misfires would be a missed opportunity at exactly the moment the country is trying to convert its research strength into companies and jobs. For the superannuation funds, family offices and venture managers deciding where to place risk capital, the detail of this measure is not academic.
What happens next
The letter is an intervention in a live policy process, which means the design is still open to change. The signatories will be pressing for consultation on the concession’s definitions and eligibility tests, and for the kind of plain-language rules that a founder can understand without a tax adviser on retainer. The government, for its part, will weigh those requests against the revenue implications and the risk of unintended loopholes.
The practical test will come when the concession’s legislated detail appears, whether through exposure draft, budget process or further Treasury consultation. That is when it will become clear whether the coalition’s arguments have landed and whether the final measure is broad and simple enough to shift investor behaviour. For a sector that has learned to read tax policy as a signal of how seriously government takes it, the answer will say a good deal about where Australia’s innovation ambitions really sit.
Sources: Tech Council of Australia.
