Australia’s tax system is often criticised for rewarding established businesses more readily than the uncertain, patient investment needed to innovate and build new ventures. The Government’s latest tax reform package attempts to shift that balance.
The Treasury Laws Amendment (Tax Reform No. 4) Bill 2026, introduced into Parliament on 27 October 2026, brings together five measures covering innovative businesses, research and development, venture capital, PAYG instalments and electric vehicles. Individually, the measures are significant. Collectively, they suggest a broader strategy – a more deliberate attempt to use the tax system to influence where private capital flows and where entrepreneurs and businesses choose to invest their hard-earned cash.
Taking an early risk – new Innovative Business CGT Concession
The clearest expression of this policy shift is the proposed Innovative Business CGT Concession (IBCC).
The Bill would give investors in qualifying innovative start-up companies access to a 50% CGT discount. This discount will not be affected by the broader CGT changes effective 1 July 2027 whereby the general 50% CGT discount for Australian resident individuals and trusts will be replaced with cost base indexation. The Government’s stated objective is to support early investment, including where founders, employees and investors acquire equity with a low or zero cost base, giving the IBCC significant beyond its immediate beneficiaries.
As early-stage businesses frequently need capital long before profitability or conventional debt finance becomes realistic, investors accepting that additional uncertainty need sufficient potential upside to justify taking the risk. These changes show the Government’s hand on where it wants to see capital directed – towards new and genuinely innovative Australian businesses. Accessing the IBCC won’t be a walk in the park. Investors will need to navigate detailed eligibility requirements at the outset, together with ongoing compliance and record-keeping obligations to preserve access to the concession
Targeted R&D support
The second major element is reform of the Research and Development Tax Incentive (R&DTI).
The proposed changes would apply for income years beginning on or after 1 July 2028 and are expressly intended to better incentivise Australian business R&D that creates broader economic benefits for Australia. The R&DTI changes can be viewed as a reallocation of support by providing stronger incentives for businesses undertaking the type of experimental, core R&D the Government wishes to encourage, coupled with tighter boundaries around smaller claims. The measures include increasing core R&D offset rates by up to 50%, lifting the turnover threshold for access to the refundable offset from $20 million to $50 million, lowering the R&D intensity threshold for higher support and increasing the maximum expenditure threshold. Eligible biotechnology and medical-technology businesses would also be able to access the refundable offset for up to 15 years, recognising their longer development and regulatory timeframes. An important integrity measure is also proposed for claims involving expenditure below $50,000, which would need to involve a Research Service Provider or Cooperative Research Centre to qualify.
Taking innovation from the laboratory to the bank
While the R&DTI can encourage the development of an idea, businesses need capital to commercialise and scale it. This is where the Bill’s venture-capital reforms sit within the broader picture.
The legislation would modernise Australia’s venture-capital tax incentives by increasing existing thresholds to reflect contemporary company valuations. The Government says this is intended to allow venture-capital investors to invest larger amounts over longer periods in start-ups that may struggle to obtain conventional finance.
Taken together, the introduction of the IBCC, the re-targeting of the R&DTI and the modernisation of venture-capital tax incentives point to a deliberate reshaping of Australia’s tax settings around the innovative business lifecycle – encouraging innovation, attracting early-stage investment and supporting access to the growth capital needed to scale.
Electric car FBT concession changes
The Bill also proposes to reshape the FBT treatment of electric vehicles, gradually replacing the existing full exemption with a more targeted concession.
From 1 April 2027, eligible electric cars valued at $75,000 or less would continue to receive the full FBT exemption, while eligible vehicles above $75,000 but below the fuel-efficient luxury car tax threshold would instead receive a 25% FBT discount, implemented through a 15% statutory formula rate rather than the usual 20%. From 1 April 2029, the full exemption would cease for new arrangements, with eligible electric vehicles below the fuel-efficient luxury car tax threshold instead receiving the 25% discount. Â Importantly, transitional rules are intended to preserve the existing treatment where the relevant financially binding commitment was entered into before the applicable transition date. Care will need to be taken, however, as subsequent changes to an arrangement, such as refinancing or a change of employer, may constitute a new commitment and potentially alter availability of the concession.
This proposed FBT change illustrates the Government’s intent to balance the behavioural objective of encouraging electric vehicle uptake against the longer-term cost of maintaining a broad FBT exemption. For employers and employees, the practical message is that the tax economics of an electric vehicle will increasingly depend on its value, when the relevant arrangement is entered into and whether that arrangement subsequently changes. Businesses operating vehicle programmes or salary-packaging arrangements should therefore factor the proposed transition into longer-term fleet and remuneration decisions, rather than assessing the vehicle solely by reference to the FBT treatment available today.
Monthly PAYG instalment reporting
The PAYG instalment reforms are less headline-grabbing but may have practical relevance for businesses managing uneven cash flows.
Taxpayers otherwise required to report and pay PAYG instalments quarterly would be able to elect to report and pay monthly. Conversely, the Commissioner would gain the ability to require monthly instalments where a taxpayer has a demonstrated history of non-compliance.
For businesses, particularly those also watching the future treatment of credit-card payments for tax liabilities, the option to pay PAYG instalments monthly rather than quarterly may hold limited appeal. More frequent payments can place additional pressure on working capital, particularly if flexibility over how those liabilities are paid is also reduced. The real significance of the reform may therefore lie elsewhere – giving the Commissioner greater scope to bring forward payments where past payment behaviour warrants closer management.
Reading the signals
Australia is in a significant period of tax reform. Businesses and investors are simultaneously dealing with measures that have already been enacted, proposals making their way through Parliament and others still subject to consultation. Against that backdrop, these latest measures add another layer to an already evolving tax landscape.
Legislation of this kind inevitably attracts attention for the concessions gained, reduced or removed. Perhaps the more valuable insight lies in what sits behind those changes. This latest Bill provides a window into the types of activity the Government considers worthy of encouragement, the concessions it considers sustainable and the areas where greater discipline is expected.
The challenge now is that no reform exists in isolation. Decisions being made now may ultimately be affected by several intersecting changes, with different commencement dates, transitional rules and final outcomes. Looking at any one proposal without considering the bigger picture risks missing its real commercial impact. For those making decisions today with consequences extending several years into the future, keeping sight of both the detail and the direction of reform will be critical. In an unsettled tax environment, understanding how the pieces may fit together could prove every bit as important as understanding each new measure on its own.
Contact your local Moore Australia office to discuss how these, or other proposed changes may affect your business or investment decisions.
