Changes to CGT rules spark concern among Australian startup founders

By Newsdesk

May 16 2026
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The recent announcement of changes to the Capital Gains Tax (CGT) in the 2026-27 budget has sent ripples of concern through Australia's startup community. Founders and investors alike are expressing alarm over the potential negative impact these changes could have on innovation and entrepreneurship in the country.

Changes to CGT rules spark concern among Australian startup founders

Pred Dragila, co-founder and CEO of Fat Zebra, has been vocal about his concerns. He argues that the new CGT rules send a discouraging message to both current and aspiring entrepreneurs in Australia. "The 2026-27 budget is telling current and future founders that Australia is closed to ambition and innovation," Dragila stated. "We’ve just killed the reward to create new businesses, create jobs and lead new industries."

The crux of Dragila's argument is that the changes will penalise founders who have dedicated years to building their companies. "Under the new CGT rules, a founder who spends a decade building a company and exits after 2027 will be essentially penalised for their perseverance," he explained. For many startup founders, the journey is fraught with personal financial risk, long hours, and uncertain outcomes. Traditionally, the possibility of a fair reward at the end of this arduous journey has been a motivating factor. However, Dragila believes that this incentive is now under threat. "That bargain is now broken," he said.

The potential consequences of these changes could be far-reaching. Dragila warns that "the inevitable result is that ambitious Aussies will take their ideas and businesses overseas, or simply choose safer career paths." This sentiment is echoed by many in the startup community who fear that the risk of establishing a startup in Australia may now outweigh the potential rewards.

Felicia Coco, founder of Pressto AI, shares similar concerns about the impact of the CGT changes on investment in Australia. "When you make Australia an unattractive place to invest, investors invest elsewhere," she noted. Coco highlights the competitive global landscape, where countries like Singapore and the UAE are actively courting investors. "Capital flows to where it's welcome, and right now, countries like Singapore and the UAE are rolling out the red carpet while we're putting up roadblocks," she added.

For Coco, the key to supporting young Australians lies in making it easier for them to succeed financially. "If we want to help young Australians get ahead, the answer is making it easier for them to make money, but also keep it," she asserted. The burden of taxation is a significant concern for many startup founders and employees who are already operating on tight budgets. "It’s hard to get ahead when every dollar counts and the tax man is shaking the can," Coco remarked.

In response to these concerns, the government has committed to consulting on the treatment of early-stage and startup businesses. This consultation is seen as a critical step in addressing the unique challenges faced by the tech and startup sector. Coco emphasised the importance of this dialogue, warning that without it, the changes could disproportionately affect those who are taking the biggest risks to drive innovation and create jobs. "That consultation will be critical, because this change will otherwise hit founders and startup employees hardest," she said.

As the Australian startup community grapples with the implications of the new CGT rules, the hope is that further consultation and dialogue with the government will lead to policies that better support innovation and entrepreneurship. For now, however, the changes have cast a shadow of uncertainty over the future of startups in Australia, with many founders and investors closely watching how the situation unfolds.

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