Key Highlights

  • Labor is drafting a capital gains tax break for people who back young, innovative Australian companies early and hold their shares for at least three years.
  • Innovation requirements, supported by a draft legislative instrument to help companies self-assess
  • The release puts the holding rule simply: "Eligible equity must only be held three years before being sold." The government said leaving investors uncapped supports simplicity and repeat investment.
  • How the 15-year and turnover tests are measured, and exactly what counts as innovation, is set out in the draft law and instrument rather than the release.

Labor is drafting a capital gains tax break for people who back young, innovative Australian companies early and hold their shares for at least three years. The Innovative Business CGT Concession, released as an exposure draft on 11 September 2026, is estimated to cost $160 million over the forward estimates. Consultation closed on 28 September. With Parliament sitting from 12 October and the domestic CGT overhaul starting on 1 July 2027, the final design matters for founders and investors.

Where the Concession Stands Right Now

The concession is not law. It exists only as exposure draft legislation released by Treasurer Jim Chalmers on 11 September, in a package titled "tax reforms to support innovation and investment". the concession was first announced in June after an earlier round of stakeholder consultation.

Submissions on the draft closed on 28 September 2026. CPA Australia said it lodged submissions on five of the exposure drafts in the package, including the concession and the optional monthly PAYG instalment measure.

An exposure draft is the stage before a bill. It lets Treasury test the wording with business, advisers and investors, and the final legislation introduced to Parliament can differ, sometimes significantly, from the draft.

The release did not give a start date. The government said the $160 million cost estimate would be finalised in the next budget update, the mid-year economic and fiscal outlook.

A $50 Million Turnover Requirement

Innovation requirements, supported by a draft legislative instrument to help companies self-assess

Eligible Equity Held for at Least Three Years Before It is Sold

No cap on how much investors can use the concession.

The release puts the holding rule simply: "Eligible equity must only be held three years before being sold." The government said leaving investors uncapped supports simplicity and repeat investment.

How the 15-year and turnover tests are measured, and exactly what counts as innovation, is set out in the draft law and instrument rather than the release. Those details could change after consultation.

The three-year rule is the simplest test for investors to understand. Equity sold earlier than that would not meet the draft's holding requirement, which means the general CGT rules would apply instead. For start-up backers, who often wait many years for a sale or listing, a three-year minimum may be less of a hurdle than the company-level tests.

Why a Separate Start-up Break is Needed Under the New CGT Rules

The concession is designed to sit alongside the government's broader CGT overhaul, which is already law under the Tax Reform No. 1 Act 2026. From 1 July 2027, the 50% CGT discount for resident individuals is replaced by cost-base indexation plus a 30% minimum tax on gains accruing from that date. Gains accrued to 30 June 2027 keep the 50% discount through a deemed market-value disposal. The new system is not a "30% discount".

Indexation works by lifting an asset's cost base in line with inflation. That helps an investor who paid a substantial amount for an asset. It does little for someone whose cost base is tiny or zero, which is common for early start-up investors.

That is because indexation is a percentage adjustment to the original cost. If the cost is small, the adjustment is small too, no matter how much the shares have grown in value.

A Worked Example of the Cost-base Problem

Under indexation, the taxable gain would be $997,000, compared with $1,000,000 without indexation. Indexation reduces the gain by just $3,000, or 0.3%.