The carve-out made headlines on June 18. The fine print is still being discussed.
Treasury opened a consultation on the Innovative Business CGT Concession in June, inviting stakeholders to weigh in on the design details before the new rules take final shape. The questions Treasury asked in that consultation paper aren’t rhetorical, they’re the unresolved details that will decide whether the carve-out functions as intended or leaves a meaningful share of startup employees exposed to the exact problem it was built to fix.
Big Number Got Settled. The Edges Didn’t
The headline arithmetic is no longer in dispute. An employee with a 1% stake in a $200 million exit faces roughly a $470,000 tax bill under the old 50% discount, versus close to $940,000 under straight indexation with no cost base to index. The June 18 announcement preserved the 50% discount for companies that meet the new Innovative Business CGT Concession, which heads off that doubling for qualifying businesses and their employee share schemes.
What “qualifying” actually means is the part still being worked out. Treasury’s own consultation paper lists the open questions plainly: whether the 10-year age limit and $50 million turnover cap target the right businesses, what conditions should extend the age limit to 15 years for sectors that take longer to commercialize like biotech, medtech, and deep tech, whether the innovation criteria are appropriate, whether the five-year holding period is the right length, whether a $10 million lifetime cap is set at the right level, and how the transition rules will treat shares issued before June 30, 2027.
None of those are footnotes. Each one decides who actually gets the relief the June announcement promised.
Biotech Founders Don’t Build on the Same Clock as Software Founders
The 15-year extension question matters more than its placement in a list of bullet points suggests. A software company can plausibly exit within the 10-year window the base concession allows. A biotech or deep-tech company, working through years of R&D and regulatory approval before any product reaches a market, often cannot. If the extension is granted cleanly, the concession protects the sectors Australia has explicitly said it wants more of. If it’s narrowed or conditioned heavily, a wide swath of the country’s longest-horizon, highest-risk startups could clear every other test and still fall outside the carve-out simply because their business model takes longer to mature than the default window assumes.
The five-year holding period sits in similar territory. It is longer than the 12-month threshold that triggered the old 50% discount, which means some employees who would have qualified for relief under the prior rules will not automatically qualify under the new one, depending on how the transition is handled for people already holding equity when the rules change.
Lifetime Cap Can Quietly Undo the Headline Promise
The $10 million lifetime cap raises a different kind of question. For most early employees, a cap that high will never bind. For a founder or very early hire with a large equity stake in a company that has a genuinely exceptional outcome, it could mean the concession protects only part of the gain, with the excess taxed under the indexation rules the carve-out was designed to soften. Whether that’s the right line is exactly the kind of question Treasury is asking for feedback on, and exactly the kind of detail that gets set once and rarely revisited.
Consultation Details Matter More Than the Headline
Whatever Treasury decides on these points becomes the operating reality for every startup employee weighing a below-market salary against future equity. The June 18 announcement answered the question that dominated six weeks of public debate: would the indexation reform apply to startup equity without adjustment. It didn’t fully answer who is protected, for how long, and up to what amount.
Founders and investors who treated June 18 as the end of the story are watching the wrong process. The version of the concession that ultimately takes effect depends entirely on how Treasury resolves the questions still sitting in front of it. The difference between a generous answer and a narrow one is the difference between a policy that prevents the next capital flight scare and one that simply delays it.
