Labor Expands Startup Tax Breaks After Backlash

The Australian Labor government will expand an existing capital gains tax concession for small businesses and introduce a new tax break for startups, responding to criticism from the tech sector over recent policy changes.

The existing small business CGT concession will now cover more firms. A separate concession will target early-stage companies, though the government has not yet specified the eligibility thresholds or the size of the tax relief. The changes are part of a broader effort to blunt complaints from startup founders and venture capital investors who said earlier tax proposals would hurt innovation.

Treasury officials said the expanded concession would apply to businesses with turnover below a revised threshold, which is expected to be detailed in the upcoming budget. The new startup carve-out is designed to reduce the tax burden on founders who sell equity in young companies, a structure that mirrors concessions in other developed markets.

The announcement follows weeks of pushback from industry groups including the StartupAUS and the Australian Private Equity and Venture Capital Association, which warned that Labor's original tax plan would drive founders and capital offshore. The government has not released revenue estimates for either measure.

Labor's tax agenda has drawn scrutiny since it proposed tightening rules around carried interest and employee share schemes earlier this year. The startup carve-outs are seen as an attempt to preserve the government's relationship with the innovation sector ahead of the next federal election.

The expanded CGT concession and the new startup break will be legislated separately. No date has been set for either bill.