Australia’s Startup Tax Package Clears the Lower House: What Founders and Investors Should Know

Australia's startup sector got its clearest signal yet this week that a long debated tax package is moving. The Treasury Laws Amendment (Tax Reform No. 4) Bill 2026 passed the House of Representatives on 29 October 2026, after Treasurer Jim Chalmers introduced it on 27 October. The bill now heads to the Senate, where it still needs to pass before any of its measures become law.

That distinction matters. Nothing in the package is law yet, and the Senate debate could still change parts of it. Still, the lower house vote tells founders, employees and early investors what the government wants the new settings to look like, and when they would start if the bill passes in its current form.

What the bill actually contains

The bill bundles three linked ideas. The first is a new Innovative Business CGT Concession, often shortened to IBCC, which would give a discount on capital gains for qualifying investments in young innovative companies. The second is a rewrite of the Research and Development Tax Incentive, known as the RDTI. The third is a set of higher thresholds for venture capital incentives.

Reporting on the bill puts the startup capital gains concession start date at 1 July 2027, and the venture capital threshold lifts at the same date. The R&D changes would start later, on 1 July 2028, if the bill passes. Those dates give companies time to plan, but they also mean no one should treat the new rules as already in force.

The startup capital gains concession in plain terms

Under the reported design, eligible founders, employees and early investors would receive a 50 per cent discount on capital gains from qualifying equity investments. A minimum holding period of three years would apply. There would be no lifetime cap on the discount, after an earlier proposal for a cap of A$10 million was dropped during consultation.

Eligibility would turn on the company, not just the investor. Reports describe a company age limit of 15 years and a turnover threshold of A$50 million. The company would also need to pass an innovation test. The September exposure draft had set a high bar for that test, requiring more than 75 per cent of at least two measures covering assets, employees and income to relate to qualifying innovative activity. The bill as introduced reportedly lowers that predominant activity threshold to more than 50 per cent, which would widen the pool of companies that could qualify.

What changes for research and development

The R&D side of the bill is where the sharpest disagreement sits. According to reporting by accounting firm Pattens and specialist adviser Swanson Reed, the refundable turnover threshold would rise from A$20 million to A$50 million, letting more mid sized companies claim cash refunds instead of carrying forward offsets. Cash refunds would generally be limited to a company's first 10 years, with 15 years for therapeutic goods research. The minimum annual spend would rise from A$20,000 to A$50,000, the maximum from A$150 million to A$200 million, and the non refundable intensity threshold would fall from 2 per cent to 1.5 per cent. Core activities would get a higher offset, while supporting activities would be removed from eligibility, a change that worries many software teams whose claims mix core and supporting work.

Higher limits for venture capital funds

Venture capital gets a quieter lift. Reports put the maximum size of an Early Stage Venture Capital Limited Partnership at A$270 million, up from A$200 million, from July 2027. The asset cap for a company at investment would rise from A$50 million to A$80 million, and the cap on returns eligible for tax exemption would rise from A$250 million to A$420 million. Larger funds could then back companies that have scaled past the old limits.

What happens in the Senate

The Senate debate is expected to focus on R&D eligibility for fossil fuel companies, with reports saying The Greens may seek limits there as a condition of support. Because both measures sit in the same bill, negotiations over R&D could affect the startup concession too. The practical takeaway is simple. Do not reprice a deal or rewrite an R&D claim on the basis of this bill alone. Use the vote as a planning signal, and get advice from a registered tax agent before acting on any specific figure, since the Senate could still amend the package.

Frequently Asked Questions

Has Australia's startup tax package become law?

No. The Treasury Laws Amendment (Tax Reform No. 4) Bill 2026 passed the House of Representatives on 29 October 2026 and now faces debate in the Senate. It only becomes law if it passes both houses and receives assent, so every figure in this article describes a proposal, not a current tax rule.

Who would qualify for the new startup capital gains discount?

Under the reported design, eligible founders, employees and early investors in a qualifying company could receive a 50 per cent discount after a three year holding period, with no lifetime cap. The company would need to be no more than 15 years old, sit under an A$50 million turnover threshold, and pass an innovation test based on more than 50 per cent predominant innovative activity.

When would the R&D changes start, and what is the biggest change?

The R&D changes are reported to start on 1 July 2028. The biggest talking points are the rise in the refundable turnover threshold from A$20 million to A$50 million, a general 10 year limit on cash refunds, a higher minimum spend of A$50,000, and the removal of supporting activities from eligibility, which has drawn the strongest industry criticism.