TITLE: Startup CGT Concession Redesigned, ATO Debt Warning, and Offshore Software Royalties: What Businesses Need to Know
Startup CGT Concession Redesigned, ATO Debt Warning, and Offshore Software Royalties: What Businesses Need to Know
Australia’s tax landscape shifted again today. The proposed Innovative Business CGT Concession is now more generous, the ATO has warned that firmer debt collection is coming, and businesses paying offshore software providers still have time to respond to draft royalty guidance.
This update is relevant to businesses in Sydney, Melbourne, Brisbane, Perth and Adelaide, particularly technology companies, digital businesses, innovative SMEs and international groups.
1. Review the redesigned startup CGT concession before 28 September
The exposure draft removes the proposed $10 million lifetime cap
Treasurer Jim Chalmers released exposure draft legislation for the proposed Innovative Business CGT Concession (IBCC) on 11 September 2026.
The exposure draft changes several settings from the earlier proposal:
- The proposed $10 million lifetime cap on eligible gains has been removed.
- The minimum shareholding period has been reduced from five years to three years.
- The eligible company window has been extended from 10 years to 15 years across all sectors.
- The $50 million turnover threshold remains.
- The requirement to satisfy the innovation criteria also remains.
The concession is intended to protect founders, early employees and investors in qualifying innovative companies from the broader CGT reforms proposed to begin on 1 July 2027.
Under those broader reforms, the current 50% CGT discount would be replaced with cost-base indexation and a 30% minimum tax rate for relevant taxpayers. The IBCC is designed to preserve a targeted 50% discount for qualifying innovative business investments.
The legislation remains a proposal. You should not treat the exposure draft as final law.
Use this checklist to preserve your evidence
If your business or investment may qualify, take these steps now:
- Confirm the company’s age. The proposed 15-year eligibility window applies across all sectors.
- Check turnover. The company must remain below the proposed $50 million threshold.
- Document the innovation criteria. Keep evidence explaining the new or significantly improved product, service, process or method.
- Review share issue records. Confirm when shares or options were issued and who received them.
- Track the three-year holding period. This is shorter than the earlier five-year proposal, but it still requires reliable ownership records.
- Separate eligible and ineligible investments. This will make future CGT calculations and reporting easier.
Treasury is accepting feedback until 28 September 2026 through the official consultation page. The exposure draft is also discussed in reporting from Startup Daily and Capital Brief.
Why this matters: removing the lifetime cap may significantly change the potential benefit for founders and early investors. However, eligibility will depend on the final legislation and the quality of your supporting records.
2. Prepare for the proposed R&D Tax Incentive changes
Align your innovation records with future claims
The same reform package includes proposed changes to the R&D Tax Incentive from 1 July 2028.
The key proposed changes are:
- The refundable support turnover threshold would increase to $50 million.
- The general 10-year access limit would remain.
- Biotech and medtech businesses would receive a proposed 15-year limit.
- The maximum expenditure threshold for the non-refundable offset would increase to $200 million.
These changes could benefit growing technology and digital businesses with substantial development programs. They may also affect how you classify R&D expenditure, document technical activities and reconcile claims to your accounting records.
Maintain a stronger R&D audit trail
Do not wait until the next claim deadline. Maintain:
- Project descriptions and technical objectives.
- Records of experiments, testing and development activities.
- Staff time records.
- Contractor invoices.
- Software and equipment costs.
- Evidence showing how expenditure relates to eligible activities.
- Clear reconciliations between your R&D claim and your general ledger.
For a fast-growing SaaS business in Melbourne, a technology manufacturer in Sydney or a digital product company in Brisbane, consistent records will reduce the risk of unsupported claims.
The proposed R&D settings are not yet final. Monitor the Treasurer’s exposure draft announcement before changing your reporting process.
3. Act now if your business carries ATO debt
Expect more active collection where debt is collectable
ATO Commissioner Rob Heferen has warned that Australia’s tax debt is expected to continue rising in the ATO’s annual report due in October.
The ATO’s total debt book was last reported at approximately $115 billion. The Commissioner said that where debt is collectable, the ATO will continue taking firmer action.
This is an important warning for businesses carrying overdue GST, PAYG withholding, income tax or superannuation-related liabilities.
Correct the September GIC rate before calculating your exposure
The official ATO rates show that the General Interest Charge for July to September 2026 is 11.43% per year, calculated daily.
The rate increases to 11.51% from 1 October 2026.
GIC compounds daily. It continues to increase while an eligible debt remains unpaid. GIC and shortfall interest incurred from 1 July 2025 are also generally no longer tax deductible.
Use the ATO’s official GIC rates and interest guidance when reviewing your account.
Complete this debt review today
- Reconcile every ATO account to your accounting records.
- Identify unpaid activity statements and tax assessments.
- Separate principal debt from GIC and penalties.
- Confirm whether any amounts are disputed.
- Contact the ATO promptly if you need a payment arrangement.
- Update your cash-flow forecast for the 1 October GIC increase.
- Prioritise PAYG withholding and superannuation obligations because these can create serious compliance consequences.
Do not treat ATO debt as ordinary business finance. Daily compounding interest and more active collection can quickly turn a manageable balance into a material cash-flow problem.
