Key Highlights

  • The proposed Innovative Business CGT Concession offers a 50% discount on qualifying gains.
  • The minimum Holding Period has been reduced from five years to three.
  • The proposed incorporation window has widened from 10 years to 15.
  • The proposed concession removes the lifetime cap and is due to begin in July 2028 if passed.

Labor's start-up Capital Gains Tax concession was loosened before it reached Parliament, yet advisers still cannot agree whether it will matter. The Innovative Business CGT Concession would offer a 50% discount on gains from eligible start-up investments, just as the general 50% CGT discount is being replaced by indexation for gains accruing from July 2027. With the Senate set to consider the government's tax bills this month, the split among advisers is sharp.

What the concession would do

The Innovative Business CGT Concession was first proposed on 18 June 2026. It is now in legislation that passed the House of Representatives on 29 October with the government's R&D and trust tax bills. It is a bill, not law.

The concession would give a 50% CGT discount on qualifying gains. It is due to start on 1 July 2028.

The design changed between announcement and introduction. The minimum holding period was cut from five years to three. The window in which the business must have been incorporated was extended from 10 years to 15. The lifetime cap was removed.

Each of those changes widens the potential pool of eligible investors and businesses compared with the June proposal.

The full eligibility criteria, including which businesses and interests qualify, sit in the bill and its Explanatory Memorandum. Investors and founders will need to check that detail rather than rely on the headline rate.

The concession would not arrive in a vacuum. Existing early-stage innovation company rules, in place since 2016, already offer eligible investors a tax offset and capital gains concessions. How the new concession sits alongside those rules is likely to be one of the questions advisers raise as the detail is tested.

Why a 50% discount matters after July 2027

The concession has to be read alongside the broader capital gains tax overhaul, which is already law.

Under Tax Reform No. 1 Act 2026, the general 50% CGT discount is replaced by cost-base indexation, combined with a 30% minimum tax, for gains accruing from 1 July 2027. That is not a "30% discount"; it is a different method of calculating the taxable gain.

Against that backdrop, a targeted 50% discount for start-up investments would stand out. It would preserve, for one category of asset, a type of concession that is being wound back more generally. Supporters of start-up incentives generally argue that early-stage Investment is riskier and less liquid than listed shares or property, and that the tax system should reflect that.

The ATO has said taxpayers may need market values as at immediately before 1 July 2027 for Assets covered by the broader changes, and that a valuation "can't be forward-looking". That guidance relates to the general CGT reforms, not the start-up concession.

Hypothetical example: a three-year start-up investment

Hypothetical example: an investor buys $100,000 of shares in an eligible start-up in September 2028 and sells them for $500,000 in October 2031, after meeting the three-year holding period.

The capital gain is $400,000. If the 50% discount applied, the taxable amount would be $200,000.

If the investor were on the top marginal rate of 45% plus the 2% Medicare levy, the tax on $200,000 would be $94,000. On the full $400,000 at the same 47% rate, it would be $188,000.

Under the original five-year holding period, the same investor would not have qualified until September 2033.

This example is simplified. It ignores the interaction with the broader CGT rules, other income, the eligibility tests in the bill and any minimum tax. It is not a prediction of returns.

'An afterthought': the sceptics

Some advisers doubt many people will benefit. Michael Gilmour of TaxBanter called the concession "an afterthought" that only "a small sliver of taxpayers" will use.

Gavin Quayle of Hilltop Tax Advisory was similarly critical, describing it as "a heavily gated regime wrapped in red tape".

The concern is that the eligibility tests, though loosened, may still be complex enough that few investors and founders can confidently rely on them. Advisers have made similar complaints about other parts of the package, including the new $50,000 test for small R&D claims.

The pace of change is also weighing on advisers. LawPath data found that Anthony Albanese has announced 4.1 small business rules a year, the most of any prime minister from 1996 to 2026.

The optimists' case for broad take-up

Not everyone agrees. Jonathan Larosa of William Buck expects broad take-up of the concession.

The removal of the lifetime cap and the longer incorporation window could make the concession more relevant for later-stage companies and repeat investors. The shorter holding period may also fit the timelines of some early-stage investors better than five years.

The concession forms part of what the Treasurer has described as $3.8 billion in relief for businesses and start-ups. That package also includes a higher turnover threshold for the refundable R&D offset, rising from $20 million to $50 million, and R&D offset rates up to 50% higher, according to Jim Chalmers' second reading speech for Tax Reform No. 4.

Whether the concession becomes a niche tool or a mainstream one is likely to depend on the eligibility detail, on how the broader CGT changes settle after July 2027, and on whether the Senate amends the bill.

What to watch: Senate, MYEFO and 2028

- Friday 13 November 2026: the Senate Economics Legislation Committee is due to report on the trust tax bills. The government is reportedly targeting Senate passage of its tax bills in the third week of November.

- Senate negotiations: watch whether the start-up concession is amended, or whether its eligibility tests change.

- December 2026: MYEFO may update costings for the start-up and R&D package.

- 1 July 2027: the general CGT changes apply to gains accruing from this date, with market values potentially needed as at immediately before it.

- 1 July 2028: the reported start date for the Innovative Business CGT Concession, if passed.

Founders and investors weighing start-up investments may find the final eligibility rules, rather than the headline discount, decide whether the concession is useful. Nothing changes unless the bill passes the Senate.