Australia’s technology industry has largely welcomed the Albanese Labor government’s latest federal budget, yet concerns remain for startups over changes to how capital gains are taxed, as well as for researchers who benefit from government grants.
The 2026 federal budget, released by the government on Tuesday night, confirmed Labor’s plans to end the current capital gains tax (CGT) discount, which halves the tax owed on any profit from selling shares (as well as investment properties and other assets) if they are held for more than a year.
Instead, from July 2027 capital gains tax will be owed on any profits made beyond inflation, and a 30 per cent minimum tax rate will apply.
The change has not only drawn criticism for breaking an election promise, but also for negative impacts industry figures say it could have on startups given many new companies offer equity as incentives to potential staff and investors, who would likely see their tax bills rise under the proposed changes.
Bronwyn Fox, the deputy vice chancellor of research and enterprise at the University of New South Wales, said Australia “needs to be careful about changes to capital gains tax”.
“Founders and early-stage investors take enormous risks over many years, and weakening incentives risk driving capital, future jobs, and industries elsewhere,” she said.
Steve Baxter, founder and CEO of defence tech investment firm Beaten Zone Venture Partners, said changing the CGT discount “risks a significant disincentive effect on private capital formation”, and could see investors spend less in Australia.
He also raised concerns about how startups will attract talent if equity becomes less of an incentive.
“If the gains on that equity are to be indexed from the date of issue, the financial logic of accepting equity in lieu of wages collapses,” he argued.
“You are effectively penalising the engineer, the salesperson, the operator, who backed themselves and backed their company.
“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.”
The Tech Council of Australia (TCA), which represents both small and large tech companies operating locally, said it has “concerns as to the impact” of the proposed CGT changes.
CEO Dr Kate Cornick said, “There is work to do to ensure Australia’s startup community doesn’t become collateral damage as a result of proposed changes to CGT.”
The government has signalled it will work with the technology sector on how the CGT changes should be applied to startups, which Cornick said “will remain a key focus” for the TCA.
‘Positive changes’ for R&D, but some research grants lost
The government’s plans to revitalise Australia’s research and development (R&D) sector were more widely welcomed, as it prepares to act on an independent review which called for “bold” government action to improve falling domestic investment in innovation.
Dr Cornick, who was a member of the expert panel behind that report before joining the Tech Council, said the government’s plans to improve the targeting of the R&D Tax Incentive from July 2028, and to expand venture capital tax incentives from July 2027, are “positive changes”.
“They are important steps toward helping more Australian companies commercialise, scale and contribute to economic prosperity,” she said.
Industry figures say Australian startups face significant changes to how company equity will be taxed. Image: Shutterstock
Liza Noonan, CEO of deep tech incubator Cicada Innovations, said, “The expansion of venture capital tax incentives and the increased expenditure cap for core R&D send a clear signal that Australia is serious about backing its most ambitious companies.”
But she also suggested founders and investors face uncertainty as some government research grants and advisory programs wind down.
“Without clear mechanisms to support the commercialisation journey, Australia risks losing not just companies, but the sovereign capability, talent and economic value they represent,” she said.
“Once lost, these things are not easily rebuilt.”
Many of the government’s changes were welcomed by industry group Science & Technology Australia (STA), which agreed with Labor’s plan to establish a National Resilience and Science Council to help guide its R&D spending.
STA also welcomed extra funding for national science agency CSIRO, but raised concerns over the scrapping of some research funding, including the $1.5 billion Australia’s Economic Accelerator (AEA) program aimed at universities, and research grants from several government departments.
CEO Ryan Winn said “there is an overwhelming sense of uncertainty in the research and development industry".
“One third of the workforce has told us they are planning to leave the sector,” he said.
“And we have decades-long under-investment in R&D that simply hasn’t kept up with the real cost of doing research.”
Finance Minister Katy Gallagher said the government would redirect $800 million in uncommitted funding from the AEA program “to support Australian science and research measures”.
Australian Academy of Science President Chennupati Jagadish said the repurposing of the AEA program was "disappointing", as was "a lack of forward investment in national research infrastructure, including high-performance computing".
"Overall, the absence of a material increase in the government’s investment in science means these initial reforms are only a welcome first step, and more is needed," he said.
Tech’s place in migration and skills
The federal budget confirmed government plans to alter the points test used to select permanent migrants, in order to choose those who are “better educated, higher-skilled, and younger”.
Around 55,000 of Australia’s 185,000 permanent migrant places in 2026-27 are set to be prioritised for “high-skilled migrants”.
While it remains unclear exactly which skills will be prioritised aside from tradespeople such as electricians and plumbers, the Australian Computer Society (ACS) – the professional association for the local tech sector and publisher of Information Age – said recognising workforce pressures in trades “does not diminish the need for technology workers”.
The organisation said it supported the government’s measures to support skills development and recognition.
ACS President Beau Tydd said, “Australia will need 1.3 million tech workers by 2030, requiring around 60,000 additional technology workers each year to meet national demand.
“Greater transparency and accountability will help build confidence in skills recognition and support clearer pathways into areas of technology workforce demand.”
