Labor backflips on tax reform after backlash

The Albanese Government has announced major concessions to its proposed capital gains tax (CGT) reforms, retreating from several measures after mounting pressure from industry stakeholders, including AusBiotech, Pathology Technology Australia (PTA), MTPConnect, ANDHealth, ARCS Australia, Life Sciences Queensland, Life Sciences WA, BioNSW, BioMelbourne Network, and
Medical Technology Association of Australia (MTAA).

Prime Minister Anthony Albanese and Treasurer Jim Chalmers unveiled the changes today framing them as targeted refinements designed to “preserve the government’s broader tax reform” agenda while responding to concerns raised through consultation. The backdown comes with a price tag and is expected to reduce Budget revenue by approximately $475 million over the forward estimates.

“We’re proposing to introduce a new innovative business tax concession for start-ups,” Prime Minister Albanese said, adding that a consultation paper is now released to allow further industry input before legislation is finalised.

Under the revised proposal, early-stage investors, including founders and employee share scheme participants of innovative start-up businesses, would receive a 50% CGT discount.

AusBiotech CEO, Rebekah Cassidy, said the CGT proposals are a positive step forward for Australia’s health innovation sector which employs around 350,000 people and has doubled in size since 2017.

“AusBiotech advocated tirelessly for recognition of the health innovation sector, as well as the unique traits of life sciences founders, their employees and investors,” Cassidy said. “We welcome that recognition in the Discussion Paper as an important step forward.”

The consultation paper acknowledges the unique characteristics of the biotechnology and medical technology sectors, including long development and commercialisation timelines inherent in bringing new therapies, technologies and medical innovations to market.

Many companies in this sector list earlier than businesses in other industries, often by necessity, in order to access the capital required to progress clinical trials and development. The proposed carve-outs, including longer eligibility periods for biotech and medtech start-ups and allowing listed as well as unlisted companies to apply in specific circumstances, would mark a move towards policy settings that better reflect the complex path faced by life sciences start-ups.

“Although there is still work to do, we thank the Government for acknowledging that MedTech needs to be treated differently,” said Ian Burgess, CEO of MTAA. “Our industry is long-term, high-risk and capital-intensive, with companies often investing years before a single patient benefits. Tax settings that reflect this reality are essential to keeping investment, innovation and jobs in Australia.”

But Cassidy warned the government’s CGT concessions cannot be viewed in isolation, arguing that separate proposed changes to the Research and Development Tax Incentive (RDTI) could still threaten the sector’s future. The proposed RDTI reforms, if implemented, would introduce a 10-year age limit for access to the R&D offset and remove eligibility of ‘supporting’ R&D activities from the offset.

“While this renewed focus to tax reform is good news, the Government must urgently address its proposed changes to RDTI, which risks clinical trials, manufacturing and companies going offshore,” Cassidy said. “These proposed changes to RDTI are unrealistic and fail to reflect the long-recognised realities, timelines and investment cycles of a sector that by necessity navigates long processes to develop life-changing and saving healthcare innovations.”

AusBiotech and MTAA are reviewing the consultation paper in detail and will consult with members, the wider sector and government on feedback that ensures the final design of the concession reflects the needs of Australia’s biotech, medtech and health tech innovators.

Despite the concessions, the government confirmed it remains committed to the broader tax package announced in the 2026 Federal Budget. The revised legislation is expected to be released for further consultation later this year before being introduced to Parliament.

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