Since the Budget, the question we’ve been asked most often is whether founders who already hold their shares would be shut out of the new startup capital gains tax concession. Treasury’s draft legislation, released on 11 September 2026, answers it. They aren’t.

The Innovative Business CGT Concession, or IBCC, is what replaces the 50% capital gains tax discount on startup shares from 1 July 2027. The draft is better than the June design on every point the sector raised, and for a founder whose company qualifies, the tax on an exit comes out roughly where it would have under the old rules.

Here’s what’s changed since June, which shares are covered, what an exit actually looks like under the new regime, and the parts still waiting on Treasury.

Four things got better since June

The June consultation paper set out a concession that was narrow enough to worry a lot of founders. All four of the main concerns have been addressed:

• The holding period drops from five years to three. Most founder shares clear this comfortably, since they were issued years ago.
• The $10 million lifetime cap is gone entirely. This was the big one. A cap would have made the concession largely irrelevant to exactly the exits it was meant to support.
• The company age limit rises from 10 years to 15, for every sector. The 15-year window was previously reserved for biotech, medtech and deep tech.
• Transitional rules are confirmed and detailed, so shares issued at incorporation years before any of this existed can qualify.

Consultation on the draft closes on 28 September 2026, and the CGT changes commence on 1 July 2027.

How the transitional rules work for shares you already own

If you hold startup shares issued before 1 July 2027, you can access the IBCC on gains arising from 1 July 2027 onwards, as long as the company meets a modified version of the criteria.

For those shares to qualify, the company must:

• be less than 15 years old on 30 June 2027, meaning incorporated on or after 1 July 2012
• have turnover under $50 million in the later of FY26 or its year of incorporation
• be an Australian resident, with more than half its staff and more than half its assets here
• satisfy the innovative company and predominant activity tests in the later of FY26 or its year of incorporation
• be registered with the Industry Secretary, through the Department of Industry, Science and Resources, before the sale happens
• not be listed, unless it was already listed before 11 September 2026

The three-year holding period will already be met for most founder shares, so for a lot of people the work is in the company tests rather than anything to do with the shares themselves.

What your exit looks like under each set of rules

Take a founder with startup shares acquired for close to nothing, selling on the top marginal rate of 47% including Medicare. Three versions of the same $5 million gain:

Illustrative figures for a founder with a near-zero cost base on the top marginal rate.

The point of the table is the first row. If the company qualifies, your exit costs about what it always would have. If it doesn’t, the tax roughly doubles. So the question founders need to answer has shifted from how much an exit will cost to whether their company qualifies, and that’s a question with a definite answer you can work towards rather than wait for.

Registration, and when backdating actually helps

This is the part most likely to catch people out, because the answer differs depending on when the shares were issued.

Shares issued before 1 July 2027. The transitional rules carry them. You need to register the company with the Department of Industry, Science and Resources before the sale, but the shares qualify regardless of when that registration happens.

Shares issued on or after 1 July 2027. New employee grants, new investor rounds, founder shares in a company incorporated after that date. Here the company must already be registered at the time the shares are issued. Registration can be backdated, but doing so means notifying every holder of qualifying shares in the company.

For a company being set up now, registering early is cleaner than relying on backdating later.

What still needs sorting

The innovation test stays qualitative. A company has to show it’s developing a genuinely innovative product, process, service or method, with growth potential, the ability to scale, a path to international markets and some competitive advantage. Those are the same principles as the existing Early Stage Innovation Company (ESIC) rules, and they describe what being a startup means in the first place, so most founders who think of themselves as running one should be able to demonstrate them. The uncertainty sits in how certification gets assessed, not in whether the concept fits.

The draft tackles that two ways. The Industry Secretary will set safe harbour conditions by legislative instrument, possibly with different ones for existing and new companies. And the department will be able to issue public and private rulings so companies can get certainty before they commit. Neither has been released yet, and the scope of the safe harbours is the single thing most worth watching.

Holding company structures need a closer look. The predominant activity test measures assets, employees and income across the whole group, so a holding company sitting over a genuinely innovative operating company should satisfy it through the subsidiary. The innovative company test doesn’t have the same explicit group treatment, which leaves room for interpretation. The safe harbours may settle it.

The tests keep applying after the shares are issued. If a company stops meeting the predominant activity test, its shares stop qualifying from that point, unless it has already met the test for 20 years or more. This is a condition on the company over time, not a box ticked once.

Some holders are outside the concession altogether. Foreign residents, super funds and companies holding shares can’t access the IBCC. Founders planning to relocate before an exit should look at the timing carefully. Holding personally or through a discretionary trust as an Australian resident, which covers most founders, is fine.

What to do while consultation is still open

Check your eligibility on the four hard tests. Company age at 30 June 2027, turnover, Australian base, and whether you can evidence innovation and predominant activity. Three of those four are matters of record, so you can settle them this week.

Start documenting the innovation evidence. What the innovation is, the growth potential, how it scales, where the competitive advantage sits. Registration will ask for this, and it’s far easier to assemble while the work is being done than to reconstruct years later.

Watch for the safe harbour instrument. If your company is innovative in a way that isn’t immediately obvious to an assessor, the safe harbour scope is what determines how much certainty you get.

Revisit your exit timing. This is the change that matters most. If the IBCC is likely to apply to you, the pressure to complete an exit before 30 June 2027 largely disappears, and you can plan around commercial readiness and what the business is worth rather than around a tax deadline. That’s a better position to sell from.

The same logic applies to the trust changes we covered in our update on the draft trust tax rules, and both feed into the wider picture in our original piece on what the 2026 Budget means for your exit.

Work out whether your company qualifies

Disclaimer: This article is for general informational purposes only and does not constitute financial, legal or tax advice. The legislation is still in exposure draft and the detail may change before it commences. Please speak with a qualified adviser (hey, that’s us!) before making decisions based on your specific circumstances.