Startup CGT carve-outs 2026: Labor lifts threshold to $10m

The Albanese government has offered startups and small businesses targeted carve-outs from its proposed capital gains tax changes, moving to settle a fight with founders, investors and industry groups. Prime Minister Anthony Albanese and Treasurer Jim Chalmers said the revised package would lift the turnover cap for the 50 per cent active asset reduction to $10 million from $2 million and add a separate startup concession for eligible founders and employees, after warnings that the original tax plan could blunt the reward for building companies in Australia.

For the local tech sector, the shift is more than a budget clean-up. It gives startups a clearer signal that Treasury is trying to preserve some upside for early staff and investors, even before the legislation is written.

Chalmers said the broader carve-outs would cost $475 million and extend the higher threshold to about 2.7 million small businesses. Speaking to ABC News, he said ministers had listened after small-business groups argued the original turnover threshold was too tight for fast-growing firms and founder-led companies. “The next steps that we announce today are all about providing more clarity and confidence to investors, more support for small businesses and more incentives for innovation,” Chalmers said. The Treasurer’s office has not yet released the draft tests that founders, option-holders and investors will need to apply.

The backlash from startups was less about one tax line than the incentive structure around exits. Founders and investors warned that the original package would shrink the payoff for local company-building, especially where early employees take equity instead of higher salaries and wait years for a liquidity event.

Labor’s separate treatment for founders and staff shows ministers accept that startups sit differently from mature small businesses. The unresolved points are the eligibility tests, the treatment of options and shares, and how the new concession will interact with the rest of the capital gains regime. Employee equity is the pressure point: early-stage companies often use options and shares to hire engineers and executives while conserving cash, so the tax treatment attached to those holdings can shape recruitment, retention and the eventual value of an exit. That is where a narrow definition could still leave parts of the startup sector outside the relief.

The Australian Financial Review argued Labor’s $475 million backdown had not settled the wider criticism aimed at the tax package, even after the government widened the small-business relief and promised extra startup support. Relief from founders and investors is likely to stay cautious until the implementation detail shows how much value has actually been preserved. In practice, Treasury’s drafting will matter more than the announcement, because cap tables are messy and employee share schemes rarely fit clean political language.

The immediate effect for startups is political. A public campaign forced Canberra to acknowledge high-growth companies as a different case from the average small business. The harder test comes next, when Treasury has to show the carve-out works in real cap tables and boardrooms as well as on a ministerial podium.