Australia startup capital gains tax exemption costs $160M

• The Australian federal government released draft legislation outlining a $160 million capital gains tax exemption for innovative startups over four years.
• Eligible investors and founders can maintain a 50% capital gains tax discount on qualified early-stage investments.
• Exemption criteria targets businesses under 15 years old with turnover below $50 million, focusing on commercialising new products.

The Australian government released draft legislation outlining a capital gains tax exemption for innovative startups that the Treasury estimates will cost $160 million over four years.

The proposal follows widespread criticism from tech sector leaders who argued that earlier capital gains tax changes would deter venture capital investment and harm local innovation.

"These reforms will support the continued growth of Australia’s start‑up and venture capital ecosystem, which is good for innovation, good for productivity and good for the economy," said Treasurer Jim Chalmers.

Under the draft rules, eligible companies must have been incorporated for fewer than 15 years, maintain an aggregate turnover under $50 million, and focus on commercialising a genuinely innovative product, process, service, or method.

The Treasury stated that the proposed framework aims to protect early-stage venture funding while maintaining broader revenue goals.

The federal government originally introduced broad adjustments to capital gains discount rates in its May budget to increase structural revenue.

Subsequent consultations led ministers to introduce targeted carve-outs to prevent local technology ventures and research partners from moving operational bases overseas.