Update, September 2026. The exposure draft is now out and it’s materially better than the June consultation paper. Holding period reduced to 3 years, $10m lifetime cap removed, company age extended to 15 years across all sectors, and transitional rules confirmed for existing founders. See what the draft actually says.
When we wrote on the 2026 Budget’s CGT and trust changes in May, the government had flagged consultation on a possible startup carve-out but provided no detail. That’s now changed.
On 18 June, Treasury released a consultation paper on a specific proposed concession – the Innovative Business CGT Concession (IBCC). This article walks through where things stand.
Where things stand: The IBCC timeline
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 was introduced to Parliament on 28 May. The startup treatment wasn’t in the original Bill and will be added by amendment in the Senate. The IBCC consultation paper was released 18 June 2026, with submissions closing 10 July. The headline CGT changes still apply from 1 July 2027.
What the IBCC proposes: Eligibility & key terms
The IBCC would let eligible holders of startup equity choose between the new indexation/minimum tax regime and the existing 50% discount for gains accrued from 1 July 2027.
Company eligibility: less than 10 years old (15 for biotech, medtech and deep tech), under $50m turnover, unlisted and independent, meets innovation criteria (an ESIC-style principles-based test plus a 100-point milestone assessment).
Shareholder eligibility: individuals, partnerships and trusts (not companies, foreign residents or super funds). Includes founders, employee share scheme participants, and venture capital general partners. Minimum 5-year holding period before sale.
Other constraints: a proposed $10m lifetime cap on gains per investor eligible for the discount. Currently drafted as applying to “new equity issued after 30 June 2027.”
The concern about existing founders, and how it was resolved
The biggest concern in the proposal as drafted is the “new equity issued after 30 June 2027” requirement. If that stays in the final legislation, existing founders who issued themselves shares at incorporation would not qualify for the IBCC. The carve-out as currently designed would only protect equity issued from 1 July 2027 onwards.
Treasury’s own consultation paper acknowledges this issue, and industry submissions are pushing back on it. Whether this softened in the final legislation was the single biggest variable for existing founders – more important than the holding period or lifetime cap details. The exposure draft resolved it in their favour.
Other industry concerns with the IBCC proposal
Partial liquidity events aren’t accommodated. A founder taking a secondary in a funding round before the 5-year mark loses the concession on those shares.
The $10m lifetime cap is restrictive at venture scale. A $30m gain would only get the discount on the first $10m.
The innovation test has been criticised as judgment-heavy and likely to favour well-advised founders who can navigate the certification process.
The 5-year holding period is restrictive given startup exits can happen on shorter timelines. Industry is arguing for three years.
Other changes announced 18 June
The small business CGT concession is expanded. The turnover threshold for the existing 50% active asset reduction lifts from $2m to $10m, bringing it into line with the instant asset write-off threshold. 98% of active businesses are now eligible. For founders eligible for the active asset reduction at exit, this is a meaningful, immediate win that doesn’t depend on the IBCC consultation outcome.
Testamentary trusts are exempt from the 30% minimum trust tax. All types, including future discretionary testamentary trusts. Not directly relevant to startup founder structures, but worth knowing if you have estate planning advice in flight.
What the IBCC means for you, depending on where you sit
If you’re an existing founder with shares already on issue: the transitional rules in the exposure draft bring your shares into the concession, provided the company meets the eligibility tests. The question is now whether your company qualifies rather than whether your shares do.
If you’re incorporating now or in the next 12 months: the IBCC can apply to your shares, and the company needs to be registered before a sale. For shares issued on or after 1 July 2027 the company must be registered at the time of issue, so registering early is cleaner than relying on backdating.
If you’re approaching an exit: the expanded small business CGT concessions are immediately available and unchanged by the IBCC consultation. If you qualify for the active asset reduction or the 15-year exemption, those routes are independent of the IBCC.
What happens next: Key dates to watch
Consultation on the exposure draft closes 28 September 2026, ahead of the CGT changes commencing 1 July 2027. Our update on the draft sets out what it contains and what’s still open.
If you haven’t already, it’s worth reading our earlier piece on the Budget 2026 CGT and trust changes for the full picture of how these changes interact with trust structures and exit planning.
Want to talk through what this means for your startup?
The IBCC is now in exposure draft, with consultation closing 28 September 2026. If you want to talk through what these changes mean for your startup and your structure, the team at Standard Ledger can help. Book a free call with the team.
Disclaimer: This article is for general informational purposes only and does not constitute financial, legal or tax advice. Please speak with a qualified adviser (hey, that’s us!) before making decisions based on your specific circumstances.
