CPA Australia backs start-up CGT concession but flags design concerns

CPA Australia has supported the Treasury’s consultation on the proposed capital gains tax (CGT) concession for investors in Australian start-ups.

However, the accounting body also warned that the policy may not deliver its objectives unless key design and implementation issues are resolved.

In its submission to the Treasury, CPA Australia said the concession could stimulate investment in “innovation and productivity-enhancing” businesses.

It also argued the framework must be easy to access, commercially practical and provide certainty for investors, employees and founders.

CPA Australia Tax lead Jenny Wong explained that Australia lags behind many neighbouring economies on small business innovation and technology use.

Wong said: “Our Asia-Pacific Small Business Survey found Australian small businesses at or near the bottom of the region on innovation and technology adoption for 17 straight years.

“Well-designed tax settings that reward genuinely innovative activity are a necessary part of any serious productivity agenda – but a concession that can’t be accessed in practice won’t shift those numbers.”

While CPA Australia supported the policy intent, it called for several targeted amendments to improve how the concession operates.

The submission warned that investors who sell eligible shares between 12 months and five years after acquisition could be disadvantaged compared with current rules.

In those cases, they would lose the existing 50% CGT discount without being able to access the new concession.

Drawing on member experience with the early-stage innovation company rules, CPA Australia noted that self-assessed eligibility tests can create uncertainty for both investors and employees.

The body also urged that employees participating in start-up employee share schemes should not lose access to the concession if their company is acquired.

CPA Australia also called on the Treasury to release detailed guidance well ahead of the proposed start date of 1 July 2027.

It sought clarity on eligibility criteria, the innovation principles underpinning the rules and any planned clearance process.

Last month, CPA Australia backed the CGT and trust tax reforms but warned design flaws could create challenges for small businesses and advisers.