Chalmers to Send Startup Tax Bill to Parliament Next Week

Treasurer Jim Chalmers will send legislation covering startup CGT concessions, R&D Tax Incentive changes and new venture capital incentives to parliament next week, he announced in a speech at the Citi A50 Australian Economic Forum in Sydney today.

"That Bill will include CGT concessions for startups, changes to the Research and Development Tax Incentive, and new venture capital incentives," Chalmers said.

The bill follows consultations on September's exposure drafts, which closed late last month. It lands after the government softened several contentious features of its proposed startup CGT carve-out, the Innovative Business CGT Concession (IBCC), under sustained criticism from founders, investors and the wider tech ecosystem.

The revised proposal cut the minimum holding period for eligible shares from five years to three. It scrapped a proposed $10 million lifetime cap and extended company eligibility from 10 years to 15. The IBCC retains a 50% discount for qualifying early-stage investments, subject to innovation requirements and a $50 million turnover threshold.

What hasn't been resolved?

Whether Treasury has taken on further startup sector feedback for the final legislation is unknown. Even after the earlier amendments, widespread concerns persisted that the combined R&D and CGT changes would leave some startups and scaleups worse off — fintechs and deep tech among them — potentially driving an offshore brain drain.

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 refundable offsets to businesses operating for less than 10 years, noting that quantum, robotics and space companies face lengthy commercialisation periods too.

Annual compliance requirements for startups under the Early Stage Venture Capital Limited Partnerships (ESVCLP) program remain another concern, especially for the added risks they create for investors.

How much more R&D does the government expect?

Chalmers maintained today that 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 is the government's estimate of additional R&D activity, not a 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 cited $3.8 billion in lower taxes for businesses, lumping the startup sector into that figure without pointing to any specific benefits.

What about AI?

Chalmers said Australia wants to capture more value across the AI supply chain, alongside investment in data centres. He promised a bigger role for the National Reconstruction Fund in Australia's AI industry.

"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," he said.

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 added.

AI standards will also come to parliament soon, according to Chalmers, who argued they would provide certainty for businesses investing in Australia.

His speech didn't outline whether the legislation would address the sector's remaining concerns about R&D eligibility and the CGT innovation requirements, or detail how founders would access the promised compute capacity. Depending on the outcomes, attention may then shift to the Senate and crossbench as the government works to get its amended tax changes through.