The Albanese Government is releasing draft legislation to implement business tax incentives that support innovation and investment and other details of our ambitious tax reform package.
This is all about supporting small businesses and start‑ups, including in the biotechnology and medical technology sectors.
These reforms will deliver more innovation, encourage more entrepreneurship and deliver certainty for investors.
Arrangements for innovative start‑ups
The draft legislation includes the implementation details for the Innovative Business CGT Concession (IBCC) announced in June following a first round of stakeholder consultation after the Budget.
These reforms will support the continued growth of Australia’s start‑up and venture capital ecosystem which is good for innovation, good for productivity and good for the economy.
They mean early investors in innovative start‑ups that begin with a low or zero cost base still receive a significant discount on a future capital gain.
The draft legislation provides a 15‑year eligibility requirement across all firms, alongside the $50 million turnover and innovation requirements.
Eligible equity must only be held three years before being sold and investors making use of these arrangements will not be subject to a cap, which will support simplicity and maintain incentives for repeat investment by successful start‑up backers.
The Government will also release a draft legislative instrument to help existing companies to self‑assess whether they satisfy the innovation requirements to qualify as an innovative start‑up.
The IBCC has an estimated cost to revenue of $160 million over the forward estimates period, with costs to be finalised in the next budget update in the usual way.
Better targeting the R&D Tax Incentive
The draft legislation also includes more detail of the Government’s reforms to better target the R&D Tax Incentive from 1 July 2028.
These reforms will make support for research and development more effective and help drive the breakthroughs that support the innovation, jobs and growth we need.
They will mean each dollar of tax offset generates around 20 per cent more business R&D and will increase R&D by young firms by around $400 million per year.
The reforms build on the findings of the Ambitious Australia Report by better targeting and simplifying the R&D Tax Incentive to better incentivise additional business R&D while improving fiscal sustainability.
This includes increasing offsets by up to around 50 per cent for core R&D, lowering the intensity threshold on the non‑refundable offset to 1.5 per cent so that more companies that invest significantly in R&D benefit from higher incentives, and increasing the maximum expenditure threshold on the non‑refundable offset to $200 million.
Access to the refundable tax offset will generally be limited to firms operating for less than 10 years, with the increased $50 million turnover threshold allowing successful firms to retain access to support for longer as they scale.
The draft legislation recognises the unique circumstances of biotechnology and medical technology firms by providing access to the refundable offset for up to 15 years, recognising the longer regulatory approval processes and product development timeframes for these sectors. This has an estimated cost to revenue of $60 million over the forward estimates period.
As part of the consultation process, the Government will also consider feedback on the appropriate treatment of clinical manufacturing R&D expenditure.
Together, these reforms improve the effectiveness, sustainability and integrity of the R&D Tax Incentive and complement the wider package of reforms to support research and development and innovation in the Budget.
Further draft materials for consultation
The exposure draft materials released today also include:
- Legislation to expand the tax incentives for venture capital from 1 July 2027 to help unlock patient capital for young, expanding firms. Most caps for these programs have not been updated since they were introduced in the 2000s.
- Legislation to adjust the Fringe Benefits Tax settings for electric vehicles to ensure the treatment remains fiscally sustainable and provides more targeted support for the shift to more affordable electric vehicles.
- Legislation to provide taxpayers with flexibility to report and pay their Pay As You Go (PAYG) instalments monthly to better reflect real time business and investment activity.
We’re delivering reform to boost innovation and investment to support job creation and a more productive and resilient economy.
We thank the many stakeholders, start‑ups and community members that have provided input on these polices already and welcome further feedback on the implementation details in the draft legislation.
The exposure draft materials are available on the Treasury consult hub, along with contact details for stakeholders who have questions or wish to discuss the materials with Treasury before lodging a submission. Consultation is open until 28 September 2026.
The Albanese Labor Government’s tax reform agenda is all about making it easier for Australians to buy their first home, cutting taxes for workers, rebalancing the tax system, and encouraging business investment and innovation.
We’re implementing these reforms in tranches, consistent with the process for legislating other large tax reform packages in the past.
We’ve already implemented significant reforms to capital gains tax and negative gearing, made the $20,000 small business instant asset write‑off permanent, and reintroduced loss carry‑back for companies with up to $1 billion in turnover.
This legislation builds on these reforms by supporting investment, boosting innovation and resilience, cutting compliance costs and making the system more sustainable.