Submission to the Senate on tax reform

In the 2026–27 Budget, the Australian Government announced it would replace the 50% capital gains tax (CGT) discount with cost base indexation and a 30% minimum tax rate from 1 July 2027. The legislation giving effect to these changes was referred to the Senate Economics Legislation Committee for inquiry on 28 May 2026.

Our CEO Cheryl Mack made a submission to the Senate Committee on the basis that these changes seriously affect angel investors and therefore, early stage investing in Australia.

As the submission said:

"Australia has spent a decade trying to build a robust startup ecosystem, and angel investors are the people who write the very first cheque, before any fund will. This Bill, together with measures already legislated in the 2026-27 Budget, will unintentionally make direct early-stage investing the most heavily-taxed way to back an Australian startup. This is at the very moment the United States has moved to make it one of the most rewarded. The investors hit first and hardest are the newest and smallest ones, including the growing number of women building their first investment portfolio. None of this appears to be intended, and all of it is fixable with targeted, low-cost changes the Government has already accepted in principle elsewhere in this same Budget."

The submission accepted that capital gains should be taxed. Its central question was whether the tax system should treat the person who writes a startup's first cheque worse than the investors who come after them.

Key points in the submission

• Indexation penalises diversified angel portfolios. Gains are indexed for inflation, but losses are only recognised in nominal terms. As angel returns usually come from a few successful companies, a portfolio's tax bill can be driven by its best performer. The submission proposed allowing inflation-adjusted losses to fully offset inflation-adjusted gains.
• Angel investors can't manage CGT the way share investors can. Startup equity is illiquid and exits happen on the company's timeline, so angels can't sell losing positions or time disposals to manage their tax.
• Startup-equity relief should include direct investors. The submission supported calls from Blackbird and others for a startup-equity measure within the CGT design, with eligibility assessed at the time of investment, and asked that it include direct early-stage investors.
• The ESIC incentive needs updating. The Early Stage Innovation Company (ESIC) incentive gives eligible investors a 20% tax offset and a CGT exemption on qualifying shares. Its thresholds haven't been reviewed since 2016–17. The submission proposed raising them, including lifting the company revenue cap from $200,000 to $1 million and the maximum company age to 10 years. It also asked that eligibility be tested when a SAFE or convertible note is signed and funded. At present, it's tested when shares are issued, which can be much later.

Read Cheryl's full submission here.

What happened next

The Committee recommended the Bill be passed, and the CGT measures are now law.

However, on 18 June 2026, the Government released a consultation paper on a proposed Innovative Business CGT Concession (IBCC) – effectively a carve out for innovative companies to treat them differently under the CGT reforms.

We welcomed this and made a further submission to Treasury to advocate for changes to the IBCC needed to avoid unintentionally penalising early stage investors.