The CGT tax reform blows - for startup founders AND everyone else

I've spent this year, after a string of blows to our ecosystem, thinking about how we make the Australian Ecosystem something to be reckoned with. The headline blows, to name a few: SXSW Sydney and TIF closing, Techstars shutting down, LaunchVic being merged, the Sydney Startup Hub closing, Fishburners going into administration. Plus the usual stuff sitting underneath it: funding hard to procure, female-founder funding still dropping, etc etc etc (I'm tired).

So I've been having conversations with founders and ecosystem people about what we think we're missing, with my thinking being: if the government isn't going to support this innovation ecosystem, maybe we need to be doing it ourselves.

One of those conversations was with a scaleup founder who'd already gone offshore to raise. They mentioned that they had good conversations with other scaleup founders at similar stages who have all expressed their struggle with the **perceived** lack of talent here. They cited one of their main reasons for remaining in Australia as being an R&D tax incentive. These are operators who've calculated line by line what this country gives back for the risk they've taken, and they're already one policy decision away from going somewhere that gives back more. AND when this founder wins, the upside goes to a US fund.

That's the context for the CGT conversation we're now having, and it's the context that's missing from how the change is being sold. On Tuesday the government indicated it will replace the 50% CGT discount with inflation indexation from 1 July 2027, with a minimum tax rate of 30%.

As a left-leaning person who didn't come from much (nothing reminds you of this more than sitting through an ADHD assessment, like I did this morning, and getting asked about your childhood 😂), I'm finding the LinkedIn support for this change a bit mindboggling. I've jumped into LinkedIn conversations with people who are perplexed the founders upset by the proposed change and back the move because it taxes the wealthy, levels the playing field, addresses the intergenerational gap. Great. If I thought this would actually do any of that, I'd be all for it. But I think it's going to widen the intergenerational gap, not close it.

Property's a separate conversation. The system there is broken, fine, I'm not interested in defending it. What I'm here to talk about is what this change does to startups, and why I think it leaves Australia smaller and further behind than we already are.

The startup CGT change won't deliver what its packaging says it will. From my conversations and the lived experience of the founders I'm talking to, the people who'll actually be hit aren't the wealthy (in this context, I'm talking about people born into money), and the people this policy is supposed to help won't come out ahead either.

I'm not worried about the wealthy. They have trusts, advisors who do nothing but tax structuring, residency options, the small business CGT concessions still intact, and the ability to wait out a policy cycle. Their wealth was never sitting in a single startup ESOP. It's diversified, mobile, and advised. This CGT change is a paperwork problem for them, not a strategic one.

What I'm actually worried about is our future founders. The ones who've got an idea, want to solve a problem, and are using AI to go validate it on a weekend. They're young, they're moving fast, and they're not tied to anything. They don't need to be here. I'm watching founders without kids leave right now. I'm watching companies like Fluency and Build Club already build like they're operating globally from day one. They're leaving because they can, because they think they can grow faster somewhere else, and that's before any of them have even factored in giving a f*ckload of their exit to the tax office.

The CGT conversation is being argued as if it's still 2018, when starting a startup meant raising a seed round in Sydney, hiring a team of engineers, and burning runway for two years before product-market fit. In 2026, AI is letting one person build and ship software solo, with minimal capital, from a laptop, in months. The founders I'm watching come through AFC and in our wider ecosystem right now are often young, broke, ambitious, and they've already worked out their options. The most obvious path being to raise and build in San Fran (which is saying something in this political landscape).

Active business equity needs different treatment from passive investment. As a Kiwi, I never thought I'd consider going back (ily NZ but business is tough out there!), but if I were to build a startup today, with this change, I would consider it. New Zealand designed almost exactly the reform Australia just announced, ran it through a Tax Working Group, and chose not to implement it specifically because of the impact on small business and shares. I'm confused as to why Australia thinks it will work (or are they not thinking?).

This CGT change doesn't land in isolation. Founders are already telling us, daily, that Australia is a tough place to build, and the government keeps sending signals that it's not on their side. The CGT change is just the latest one. The question every founder I'm talking to is quietly asking is "how serious is Australia about innovation, really?"

Step back from the policy debate for a second and look at what these founders actually build. The startups I'm watching every day are solving problems Australia can't get to through any other channel. Healthcare reaching regional towns where life expectancy lags the cities by years. Edtech taking load off teachers in schools that can't recruit. Climate tech, defence, agriculture, the unsexy critical infrastructure that government can't deliver alone at scale. These founders are building because they want to solve something nobody else is fixing. And of course, why wouldn't you want the upside from doing it better than anyone else. The two aren't mutually exclusive, and the reward at the end is exactly what makes the years of risk worth taking. If we make staying here too painful, we lose more than the company and the jobs - we lose the only mechanism currently delivering some of those solutions to the parts of Australia that need them most.

It's also important to look at where "and everyone else" really gets its weight. When a founder leaves, the company doesn't disappear, it just gets built somewhere else, with people hired somewhere else. So Australia doesn't lose one person. We lose the jobs that company would have created here, the opportunities for the people who would have worked there, and the next wave of founders those employees would have become. A lot of today's founders worked at someone else's startup first, picked up the skills and might get some ESOP, then went and built their own. The young Australians this policy is supposed to be helping buy houses don't get those jobs, because the companies aren't here.

So why aren't they looking at where this actually lands. The wealthy will be fine. But ambitious founders WILL leave for somewhere their risk is rewarded. The Australians who were supposed to benefit from a fairer system end up with fewer companies, fewer jobs, and fewer chances to build their own way out. America gets richer off our brain drain. Australia gets smaller, not fairer.

What the f*ck are we doing?

The consultation period is open by who and how are they consulting people - anyone know?

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