Australia's 2026 federal budget is being called the most significant transformation of Australia's tax system in more than a quarter of a century. Here's what actually changed, and why the startup world is worried.
What changed
Previously, if you sold an asset — shares, a business, an investment property — after holding it for more than a year, you only paid tax on half the profit. From July 2027, that's gone. Instead, gains are adjusted for inflation, and a minimum 30% tax applies to whatever profit remains. Negative gearing on existing properties is also restricted, and trusts face a new 30% minimum tax from 2028.
Why start-ups get hit hardest
When you build a company from scratch, your shares are essentially worth nothing on day one. There's no cost base to index against, which means that under the new rules, almost the entire exit gain becomes taxable, compared to half before. A founder who spends ten years building a business, taking a below-market salary and backing themselves through uncertainty, now hands over significantly more at the finish line.
That changes the fundamental question: is it worth it?
It's not just founders. Joining an early-stage startup typically means trading a higher salary for equity, taking a bet on future upside. As Steve Baxter founder and CEO of Beaten Zone Venture Partners put it: "If the financial logic of accepting equity in lieu of wages collapses, the result is fewer talented people willing to take that bet, and more startups that simply cannot compete for the talent they need to grow."
CPA Australia's tax lead Jenny Wong called the changes a "minimum tax on aspiration", warning it sends a clear message to anyone thinking about building something: the government takes at least 30%, regardless of the risk you took to get there. Fat Zebra co-founder Pred Dragila put it more bluntly: "The 2026-27 budget is telling current and future founders that Australia is closed to ambition and innovation."
The bigger picture
While governments globally are competing to attract founders and venture capital through startup-friendly incentives, Australia is moving toward tighter taxation of capital gains. More innovation will go elsewhere, and the consequences will be felt hard in the long term through the companies not built, the jobs not created, and the technology not developed here.