Chalmers makes $20,000 asset write-off permanent, lifts VCLP cap to $480m

Treasurer Jim Chalmers handed down the 2026–27 federal budget on Tuesday evening, delivering a mixed bag for Australia’s technology sector — a permanent $20,000 instant asset write-off and a near-doubling of the venture capital limited partnership investment cap offset by capital gains tax reforms that founders and investors have already labelled catastrophic.

But the CGT changes — which replace the long-standing 50 per cent discount with a minimum 30 per cent rate for assets held longer than 12 months — drew immediate fire. Founders warned the reform could redirect early-stage capital away from unlisted technology companies and toward the sharemarket, where the effective tax outcome is now more favourable.

“The government will consult on the interaction of capital gains tax reforms and incentives for early-stage and startup businesses,” Treasury said in budget documents.

That sentence is the thin reed the startup sector is now clinging to. And the Australian Financial Review reported ahead of the budget that founders and venture investors had described the CGT change as catastrophic for the incentive structure that has underpinned Australia’s most successful technology exits — Atlassian, Canva, WiseTech — over the past two decades.

What the budget delivers for startups

Most immediately, the permanent instant asset write-off at $20,000 becomes law for good. Previously an annual political football renewed on a year-to-year basis, the measure lets a founder expense a laptop, server, or testing rig in the year of purchase rather than depreciating the equipment over multiple years. Bootstrapped companies running lean see the cashflow benefit straight away.

Structurally, the Venture Capital Limited Partnership reforms go further. The asset-value cap for eligible VCLP investments rises from $250 million to $480 million, expanding the pool of companies that qualify for the concessional tax treatment the regime extends to foreign limited partners. Behind that move, Treasury’s reasoning — set out in Budget Paper No. 1 — is that a higher cap pulls more institutional capital into Australian venture funds by making larger, later-stage funding rounds eligible for the same preferential treatment.

Start-ups will also be eligible for a refundable tax offset on losses of up to $20,000, Treasury confirmed. Effectively, it is a cash rebate for pre-revenue companies that are burning against research and development spend. SmartCompany catalogued nine startup-specific measures in the budget, a list that spans tax relief, R&D incentives, and changes to the employee share scheme framework that governs how early-stage companies compensate talent before they can afford market salaries.

And the permanent write-off and VCLP expansion are the kind of structural, multi-year measures the tech sector has lobbied for across successive governments. Are they groundbreaking? Not really. Durable? Yes.

The CGT reform and why it complicates the picture

Here is where the budget creates friction for technology companies.

Under the current system, an investor who holds an asset for more than 12 months receives a 50 per cent discount on the taxable gain. A founder who spends eight years building a company and exits with a $2 million gain pays tax on $1 million. Under the new system, Treasury applies a flat 30 per cent rate to the full gain instead. The effective tax rate on long-held startup equity rises.

Importantly, the reform is not targeted at startups — listed shares, investment property, and unlisted equity are all caught by the same change. But startup equity is uniquely illiquid. Uniquely risky. It also depends, more than any other asset class, on the prospect of an outsised exit to attract both talent and the patient capital that funds the eight-year build. Founders argue that taxing a startup exit at the same effective rate as a share portfolio gain ignores those structural differences.

This policy tension is not new. Every CGT reform cycle since the discount was introduced in 1999 has had to reckon with the startup carve-out question, and this one is no different. The difference is that the 2026 budget simultaneously expands the VCLP regime while raising the tax rate on the exits that VCLP investors are underwriting.

So the budget pulls in two directions at once. A founder reading the VCLP section sees a government that understands venture capital’s role in the innovation economy. That same founder, reading the CGT section three pages later, sees a government that has not yet decided whether startup equity deserves different treatment from a share portfolio.

The consultation question

Treasury’s commitment to consult on the interaction between CGT reform and startup incentives is the mechanism through which a carve-out might emerge. Whether the consultation produces a meaningful exemption for early-stage equity or becomes a holding pattern that leaves founders in limbo for 12 to 18 months is the open question.

Industry bodies including the Tech Council of Australia and StartupAus have signalled they will push hard for a specific startup exemption. Their argument, put simply: the VCLP expansion and the CGT reform cannot be treated as separate policy levers. They are two ends of the same pipe. Expanding the pool of venture capital while simultaneously raising the tax rate on the exits that venture capital funds is a contradiction, not a compromise.

No consultation timeline has been published. For founders weighing an exit in the next 18 months, that absence of clarity is itself a cost.

What it means for the ecosystem

Over the past decade, Australia’s startup sector has matured considerably — from the 2012–2016 boom that produced Atlassian’s Nasdaq listing through Canva’s rise to a valuation north of $US40 billion ($A61 billion). Yet the pipeline from seed to scale-up remains fragile. The VCLP cap increase and the permanent asset write-off address the operational and capital-access frictions that early-stage founders navigate every day.

By contrast, the CGT reform — if applied to startup equity without a carve-out — pulls in the opposite direction. A founder who can keep more of an exit by holding listed shares than by holding unlisted startup equity has a rational incentive to direct both capital and talent toward the public market. That is the long-term structural risk.

Treasury’s framing of the budget as a package about “economic resilience and economic reform” casts these measures as a coherent whole. The startup sector’s verdict will depend on whether the consultation produces a genuine carve-out — or a press release.