The Australian government has amended key elements of its planned capital gains tax (CGT) reforms following widespread criticism from the technology and biotech sectors, though concerns remain that the changes may increase bureaucracy and continue to disadvantage some start-ups and drug discovery companies.

Initially announced in the federal budget in May, the reforms aimed to abolish the 50 percent CGT discount for certain investments, a move that sparked a backlash from entrepreneurs and investors. In response, Treasurer Jim Chalmers and Prime Minister Anthony Albanese have adjusted the proposal, removing a $10 million lifetime cap for individuals, extending the eligibility period for start-ups from 10 to 15 years, and shortening the minimum investor holding period from five years to three. However, the government has retained a $50 million annual turnover ceiling, a point of contention among industry stakeholders.

Ben Grabiner, founding partner of seed fund Side Stage Ventures, which led a group of around 20 tech entrepreneurs to lobby the government, expressed cautious optimism. While welcoming the rollback of several "egregious" aspects such as the lifetime cap and reduced acquisition period, he emphasized that the reforms still risk creating additional administrative complexity for founders.

“Our concern now is about the increased bureaucracy this will impose on Australian entrepreneurs,” Grabiner said. Side Stage Ventures primarily supports early-stage ventures, typically investing in pre-seed or seed rounds up to $1.5 million.

Voicing stronger criticism, David Williams, chairman of ASX-listed biotech company Arovela, argued that the reforms overlook the unique realities of drug discovery. Arovela is currently developing a novel cell therapy for cancer and treating its first patient. Williams described the $50 million turnover limit and 15-year cut-off as “nonsense” and said the government’s approach was “out of step” with the long development cycles typical in biotech.

“Drug discovery is not time-based; it’s about commercial outcomes,” Williams said, noting that their clinical trials and manufacturing processes require extended periods and substantial investment. He further criticized the proposed Research & Development criteria, stressing that their off-the-shelf cell manufacturing should qualify for incentives.

Similarly, Christiaan Jordaan, founder and CEO of Sicona Battery Technologies, cautioned that the reforms could deter young entrepreneurs and drive innovation offshore to countries like Singapore, which offer more favourable tax environments. Jordaan argued that the government should focus on reducing barriers rather than introducing complexity.

“I believe in capitalism and entrepreneurial spirit, and we need to make it easier, not harder,” Jordaan said. He encouraged dissatisfied individuals to voice their concerns through voting in the next federal election.

In defending the revisions, Chalmers stated that the government would forgo at least $160 million in revenue to bolster innovation. He maintained that the reforms will enhance Australia’s start-up and venture capital landscape by allowing early investors to continue benefiting from a substantial CGT discount on future gains.

“These changes are designed to support sustainable growth in Australia’s innovation ecosystem, which is beneficial for productivity and the broader economy,” Chalmers said.