Foreword
Wilson Asset Management welcomes the opportunity to make a submission on Treasury’s consultation paper on Capital Gains Tax (CGT) arrangements for innovative start-ups and the design of the proposed Innovative Business CGT Concession (IBCC).
Wilson Asset Management is an Australian investment manager established in 1997, investing $6 billion on behalf of more than 130,000 retail investors. As the investment manager of nine listed investment companies (LICs) and four unlisted funds, we have deep knowledge of public and private markets, and the role that business investment and the flow of capital play in our economy.
We made a detailed submission to the Senate Economics Legislation Committee on Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 on 9 June 2026. This submission builds on that analysis and responds specifically to the Innovative Start-Up arrangements now out for consultation.
Our point is straightforward. The IBCC is a welcome acknowledgement that the broader CGT changes are flawed, and a narrow conditional carve-out cannot repair a structural problem. By proposing to keep the 50% discount for early start-up investors, the Government has conceded the underlying problem. The new system of indexation and a 30% minimum tax falls hardest on fast-growing assets that start from a low or zero cost base, producing very high effective tax rates and discouraging exactly the risk-taking investment Australia needs most.
This logic does not stop at unlisted start-ups. The cleanest, least-distortionary response is to retain the 50% CGT discount for all productive Australian assets and consider any housing-related reform separately. To be clear, Wilson Asset Management has no objection to the tax reform of unproductive assets such as housing. We object to the taxation of productive capital in a manner that discourages investment, entrepreneurship and economic growth.
We do, however, welcome one constructive step. On 18 June 2026 the Government said it would write more of its tax reform detail into the Bill itself, through amendments in the Senate, rather than leave it to ministerial instruments to be decided later. That responds directly to a concern we and others raised, though the job is unfinished: the IBCC has not yet been drafted, and its key parameters are still being consulted on. We urge the Government to take the same approach with the IBCC and set its core rules (the thresholds, the innovation test and the sector extensions) in the legislation itself, with clear definitions, rather than leaving them for the minister to decide later.
Productivity is the real test
Australia’s central economic challenge is productivity. Tax reform should be judged by one question: does it direct capital towards building new productive capacity? Tax settings that increase the after-tax cost of investing in productive Australian businesses reduce capital formation, innovation, productivity and, ultimately, real wages.
Capital is increasingly mobile. Australian entrepreneurs can incorporate overseas, Australian investors can deploy capital globally, and foreign investors can choose other jurisdictions. Tax settings that raise the after-tax cost of investing in registered Australian businesses inevitably reduce Australia’s competitiveness for productive capital.
For decades, too much capital has flowed into existing assets, inflating their value rather than expanding Australia’s productive capacity. Reform should redirect capital from existing assets towards productive investment. Instead, these reforms increase the tax burden on productive capital itself.
The 50% discount partially compensated for inflation, and for the reality that retained earnings have already been taxed once inside the company. The new framework fixes the first and ignores the second. Consider two Australian companies earning identical profits: one distributes all earnings as franked dividends, the other reinvests every dollar into expansion, technology and hiring. Under the proposed framework, the company that reinvests is subject to materially higher effective taxation through capital gains when investors eventually realise those gains. Tax policy should not favour distribution over reinvestment.
The IBCC confirms the problem but does not solve it
The existence of the IBCC is itself an argument against the broader capital gains tax reforms. The consultation paper accepts that large capital gains realised over short periods from a low or zero cost base will face higher effective tax rates under indexation than under a flat discount, and that this would deter early-stage investment with significant spillover benefits. It cites evidence that firms operating for five years or less have created around 60% of all new jobs in Australia over the past 20 years, and that Australia’s highest-performing young firms achieve productivity around 45% above industry averages. We agree. The difficulty is that this reasoning is not confined to a small, defined set of unlisted companies, it describes productive, growth-oriented investment across the economy.
A carve-out built on multiple eligibility gates, a five-year holding lock, a discretionary innovation test and a $10 million lifetime cap does not deliver the certainty that investors price into the cost of capital. It replaces a long standing and well-understood 50% discount with a complex, conditional, time-limited and capped substitute available to a favoured few. Every additional condition is another point of uncertainty, and another reason for capital and investors to look elsewhere.
This matters most where the design is narrowest. As it is proposed, the IBCC is available only for unlisted, independent companies, and is unavailable to listed companies, foreign residents and superannuation funds. It does nothing for the many Australians who back Australian growth companies on the ASX. A company that does what national policy should encourage by listing on a public exchange to raise capital, employ more people and give ordinary investors a stake, causes its investors to fall outside the concession altogether. A concession intended to support Australian innovation should not, by its own design, disadvantage the businesses that choose to raise growth capital in Australia’s public markets, or the everyday Australians who invest in them.
Recommendations
Our primary recommendation is unchanged from our submission to the Senate Economics Legislation Committee:
- Retain the 50% CGT discount for all productive Australian assets and consider any housing-related reform separately. This is the simplest and least-distortionary outcome and it removes the need for the IBCC and its complexity entirely.
- If the Government nonetheless proceeds with the IBCC, we recommend at a minimum that it:
- Extend eligibility to all registered Australian companies, beyond unlisted companies, so that companies which raise growth capital on the ASX, and the investors who back them, are not disadvantaged, and so that eligibility established when equity is issued is not lost simply because a company later lists.
Conclusion
The IBCC is, in substance, an acknowledgment that taxing real, productive, risk-bearing capital more heavily discourages the investment Australia most needs. The logical response is not a narrow, capped and conditional patch for a favoured few unlisted companies. It is to keep the discount that has worked as a stable foundation of the Australian investment framework for 26 years, for all productive Australian assets.
When you tax the returns on risk-bearing capital more heavily, fewer people take risk. The long-term losers are not existing wealth holders, but the next generation of founders, investors and everyday Australians trying to build a better financial future. We would welcome the opportunity to discuss this submission with Treasury.
Geoff Wilson AO
Chairman
Wilson Asset Management
Responses to key questions:
Does the proposed IBCC provide an appropriate arrangement to support investment in innovative start-ups in the context of the Government’s CGT reforms and other support for innovative start-ups?
Not in its current form. We welcome the intent, but the IBCC is narrow, complex and capped, and it does nothing for the many productive assets that fall outside it. The better answer is to keep the 50% discount for all productive Australian assets. If the Government does proceed with the IBCC, it should be simpler, have a higher cap and a shorter holding period, and cover all registered Australian businesses and the investors who back them, so they are not worse off than investors in unlisted companies.
Do the 10-year age limit and $50 million turnover threshold appropriately target small innovative start-ups?
The thresholds are a reasonable starting point, but as hard cut-offs they remove support at the very moment a company starts to succeed and grow. The bigger problem is the “unlisted and independent” rule. This means that a company that lists on the ASX, raises capital and employs more Australians causes its investors to lose the concession. That is the opposite of what a productivity-focused policy should do. If an investment qualifies when the shares are issued, that should not be taken away simply because the company later lists or grows.
What eligibility criteria for a longer 15-year age limit would be appropriate for sectors such as biotech, medtech and deep tech that take longer to commercialise?
We support a longer limit. It should be set out in the legislation, with clear sector definitions, rather than left to the minister’s discretion. Capital-heavy sectors that take a long time to bring a product to market, biotechnology, medical technology, advanced manufacturing, clean-energy and other fields built on major scientific or engineering breakthroughs routinely need well beyond ten years. For these sectors, 15 years should be the floor, not the ceiling.
Are the proposed innovation principles appropriate and workable?
Not as drafted. The ESIC-style innovation principles are vague and rely heavily on judgement, and getting certainty through a private ruling or registration is slow and expensive. That cost falls hardest on the small teams and early-stage investors least able to bear it, while bigger firms can manage these costs. We recommend a fast, low-cost and binding certification process, run through a single body, with a clear way to appeal, so an investor knows up front whether the concession applies, rather than finding out years later when they sell.
Is the five-year minimum holding period appropriate to be consistent with a long investment horizon?
Five years is too long, and it works against the very people the concession is meant to help: the early employee who took shares instead of salary and needs cash to buy a home or start a family; the early-stage investor who wants to back the next venture; and the investor whose company is bought before the five years are up. We recommend a three-year holding period, the same as the Government’s existing employee share scheme start-up concession.
Does a $10 million lifetime cap appropriately balance support for investment with the need for concessions to be well-targeted and proportionate?
No. The concession applies only to the first $10 million of gains a person makes over their lifetime to a maximum benefit of around $2.4 million and that cap is not indexed. Gains above the cap get no discount at all. Capping it tells founders that Australia is not serious about backing companies that grow to real size here rather than overseas. Under the current rules there is no cap at all. We recommend the cap be removed, or set much higher and indexed to inflation, so the concession does not penalise the founders, employees and investors the policy is meant to encourage.
Are the proposed transition arrangements for shares in start-ups issued before 30 June 2027 appropriate and workable?
The transition arrangements are too complex. Asking a company to prove it was “innovative” back in 2025–26 is a test about the past. That creates uncertainty for investors who backed these companies years ago, under different rules and with no chance to plan for it. The simplest and fairest option is to let existing eligible shares stay under the old rules, rather than splitting each gain into a part before the start date and a part after. Investors who would prefer it could instead use the share’s market value on 1 July 2027 as their starting point. Either way, this avoids forcing expensive valuations and extra paperwork onto mid-market investors, who are least able to afford them.
