10 July 2026
Australia’s technology sector is our fastest-growing productivity engine, currently contributing $248.5 billion (8.9% of GDP). Its growth is underpinned by the startup sector, which is responsible for creating high-growth, innovative businesses that create jobs, boost exports and innovation across every industry, and are strengthening the nation’s long-term competitiveness, economic resilience and prosperity.
Australia’s startup ecosystem depends on three interconnected and ambitious participants—capital, founders and employees—who each take significant productive risks in exchange for the potential upside of equity. Together they create a self-reinforcing cycle: investors back founders, founders build companies and hire employees, and successful exits generate the next generation of founders, mentors and investors.
The reward for productive risk taking is long-term capital gain. Founding a company, backing one, or joining it for equity in place of a competitive salary is rational only where the reward for success is large enough to outweigh the more likely failure.
But talent and capital are mobile. Australia’s ability to incentivise establishment, growth and retention of innovative, high growth companies requires globally competitive policy settings. These settings must encourage: founders to start and grow their businesses here; investors to invest in high risk startups over other safer assets; and employees to take on roles in businesses that necessarily offer lower salaries than more stable employment.
Because founders, employees and investors rely on the after-tax returns of the others,
weakening incentives for any one group ultimately slows innovation, investment and the
growth of the entire ecosystem.
The proposed IBCC, while attempting to solve CGT treatment for innovative high growth businesses, does not provide the necessary levers to incentivise ambition and risk. The reform reaches founders, employees and investors, but each through a different mechanism.
Founders are hit hardest through the $10m lifetime cap. The belief that founders can change their lives will drive startup creation in Australia. While the cap rewards the few people who actually build a large company, at the very moment they achieve scaling – the policy’s stated goal – the IBCC pushes them back into the 47% regime on gains made above the cap.
Employees hold the smallest stakes and the least flexibility. A five-year holding rule tied to share issuance can unfairly exclude employees who hold options for many years before exercising, despite having long-term economic exposure.
Investors are barely served at all – and this is the most serious design flaw. The cap is expressed as $10m of gain, not as a multiple of capital deployed. An investor who puts real money to work needs the concession to scale with the capital at risk. Without that multiple, a fund or serious angel exhausts a flat $10m gain cap on a single good outcome and is disincentivised to invest further.
In all cases the IBCC widens the after-tax gap against equivalent peer innovation nations. This leaves Australia exposed to a brain drain, an inability to attract top talent and a contraction of venture capital upon which the startup ecosystem depends.
The TCA recommends changes to the proposed IBCC to narrow the gap and make Australia a more competitive place to start and scale global technology businesses.
These are the innovative, high growth businesses on which our future will depend. They are the ones creating new high value jobs, increasing export revenues and driving our future productivity. They are the ones building sovereign capability, resilience and prosperity. They are the Future Made in Australia.
