CGT Changes Push Companies Toward Dividends, Early-Stage Firms at Risk

The same logic discourages share buybacks. Buybacks lift the share price but create capital gains that will be taxed at the new higher rate. Dividends, particularly fully franked ones, become the tax-efficient alternative.

The Hidden Cost for Early-Stage Companies

The article cautioned that the CGT changes could penalise companies that cannot pay dividends. Mineral explorers, early-stage drug researchers, and other pre-revenue firms traditionally reward investors through outsized capital gains when they eventually become profitable. If investors prioritise dividend-paying stocks, those early-stage companies may struggle to attract capital.

"It would be a tragedy if early-stage companies and new floats that are not able to pay dividends are discriminated against by investors simply because they can't pull the dividend lever for many years," the article said.

That dynamic could suppress innovation and reduce the overall health of the market if tax policy favours mature, low-growth dividend payers over younger companies that may become the next generation of market leaders.

For now, the immediate effect is clear: more dividend-focused products are coming to market, and companies with franking credits are under pressure to distribute them. The new CGT rules take effect July 1, 2025, giving boards time to adjust payout policies. Whether that adjustment helps or hurts the broader market depends on how many companies follow Alkane's lead.