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Australia builds more billion-dollar companies per VC dollar than any ecosystem on earth (wrote about here). We also rank 19th of 20 developed economies for venture capital per citizen, ahead only of Cyprus.

Both things are true & the second stat actually explains the first.

More recently, I wrote about the proposed CGT changes in the 2026 federal budget (read here), which I argued would hurt the people they're framed as protecting. This piece is what happens when you put those two arguments side by side.

The CGT change is the latest layer being stacked on top of an ecosystem that is already needing more support. And it's the most direct disincentive yet to build in this country (note, I don't think people will stop building, they'll just move when the time is right!).

There's a counter-argument I keep seeing on LinkedIn: that the founders complaining about the CGT changes don't understand their privilege. Fair (sort of). We're lucky to live & build in a country with public hospitals, great infrastructure, and pretty good schools.

But that privilege doesn't change what's actually happening in the room. The CGT change is one of four policy moves currently in motion that, together, are (and I do think it's unintentional) defunding & disincentivising the ecosystem that has built our most valuable companies.

A new site built by Iain McDonald of 8seats has made this picture clearer than I've seen anywhere else. McDonald has pulled together data from the Tech Council of Australia, Cut Through Venture, the Global Startup Ecosystem Index and WIPO into one of the clearest pictures of where the Australian ecosystem actually stands and it's worth your time to check it out (do so here). A lot of the data points below come from his work.

Start with the early-stage number. The average American has US$614 of venture capital flowing into early-stage companies in their economy on a per-capita basis. The average Australian has US$24 which is FOUR percent of the US rate. Across all stages of venture capital, Australia sits at $90 per citizen. Singapore is at $529, the US at $507, Israel $325, Switzerland $318, and the UAE $263.

That same scarcity shows up in how the capital actually moves. Deal count dropped 17% year-on-year in 2024-25 and of what did flow, 58% went to just 20 deals - it's tough out there if you're the rest of the ecosystem raising. Beyond that, offshore-led rounds made up 66% of all 2025 venture deals, meaning two out of three growth-stage rounds in this country were ultimately run by someone sitting overseas.

And yet, despite all of it, Australia keeps producing world-class companies. I've written about why this happens before. When local capital is scarce, Australian founders raise later, run leaner, burn less, and chase international customers from day one. Atlassian, Canva, SafetyCulture: none were built for the Australian market. They were built for the world, often with a fraction of the team their US equivalents had at the same revenue stage.

Here's the catch though: that discipline only works when there's still some capital to be efficient with. The policy environment is now making it worse on four fronts at once.

The first is superannuation. Australian super funds hold $4.8 trillion in assets. Almost none of it flows into early-stage venture - ASIC and APRA regulation has effectively locked it out. So we've got the biggest pool of patient capital in the country sitting on the sidelines, while founders here have to raise from offshore.

The second is exits. ASX listings have run well below historical norms for three years running - 35 in 2025 against a long-run annual average of 83, with most of those being resources companies rather than tech scaleups. Which means the moment when capital cycles back into the ecosystem (founders cashing out, reinvesting, becoming angels themselves) has basically gone.

The third is the angel base. The federal government is reviewing the Sophisticated Investor threshold, with a proposal to lift it from $2.5M in net assets to $4.5M. Sounds technical, but here's what it actually does: about 70% of active angels right now qualify by income, not assets. And $4.5M is more than four times the median Australian pre-seed round - we'd be requiring investors to sit on multiples of the rounds they're allowed to fund. So the people writing the first $25-$100K cheques into pre-seed companies are about to be legislated out of the market. Our angel pool, already thin, could be halved by 2027.

And the fourth is CGT. The 2026 federal budget proposes replacing the 50% CGT discount with inflation indexation and a 30% minimum tax rate from 1 July 2027. The fairness framing aside, what it actually does is cut the after-tax return on every long-term equity bet Australian founders, investors and ESOP-participating employees make.

Any single one of these alone could be fine, but together it feels like a lot for a founder to manage. And the fact that two-thirds of our scaleup decisions are already being made offshore tells you we're already looking outside the country for the answers.

So, here's my concern. The ecosystem is producing world-class companies in spite of the conditions, not because of them - and policy is the mechanism making those conditions harder. We're talking about a part of the economy that's now 8.9% of Australian GDP, contributing around $248.5B annually. The people producing that value are doing it through one of the toughest market cycles we've seen in years. They won't stop building - they'll just start choosing where they build. This is the moment to back them in, not stack more disincentives on top.

The Tech Council of Australia has modelled this out. Early-stage funding will match US per-capita levels by 2030 if recent growth continues, but scaleup funding is on track for a $53B gap by 2030 without structural action. Closing that gap means tackling exactly the kinds of barriers above. The difference matters: it's the difference between Australia being its own tech economy and being a feeder system for offshore acquirers.

The part that really gets me though: every one of these policy choices hits hardest where the ecosystem is already most fragile. Female founders already drop from 32% participation at pre-seed to 14% at Series A. Regional founders already struggle to access capital concentrated in Sydney and Melbourne. The people actually building the next wave of Australian companies are operators on second salaries, taking second mortgages, raising from angels who got into it because they were founders themselves once. They're also hiring engineers, designers and early team members on ESOPs - lower salaries today in exchange for upside down the track. The CGT change cuts that upside before they ever see it. None of these people are sitting on $4.5M in net assets. Take that pool out, and the only ones left building are the ones who were going to be fine no matter what.

The fix isn't complicated - we should be incentivising three things: the build, the funding that backs the build, and the returns staying here when the build pays off. Every policy move above pulls against at least one of those three.

And if we're looking for new tax revenue, there's a more obvious place to look than the founders building here: the multinational tech companies pulling billions out of our economy - read more here.