For months, the public discussion surrounding proposed changes to Australia’s capital gains tax (CGT) regime has centred on housing affordability, negative gearing and property investors. However, beneath the headlines lies a much broader and potentially more consequential issue for Australia’s economy: the future of Australian innovation, founder equity and the next generation of unicorn startups.
Australia has produced an increasingly impressive list of globally recognised unicorn companies — businesses founded locally that achieved valuations exceeding US$1 billion. Companies such as Canva, Atlassian, Airwallex and SafetyCulture demonstrate that Australian founders can build globally competitive businesses from Australian soil.
The concern is whether future founders will continue to do so.
Recent media reports suggest the Federal Government is actively considering significant reforms to the existing 50% CGT discount as part of the 2026 Federal Budget. While the political narrative has focused heavily on residential property, economists, advisers and market participants have increasingly raised concerns that the proposed changes may extend beyond real estate and into other asset classes, including shares, business interests and potentially intergenerational wealth transfers.
If founders ultimately face taxation on effectively 100% of the gain generated from years of entrepreneurial risk-taking, Australia risks creating a powerful incentive for the next generation of unicorns to be incorporated overseas from day one.
That is where the real economic risk lies.
The Current CGT Discount Was Designed to Reward Long-Term Risk
Australia’s current CGT framework broadly provides individuals and trusts with a 50% discount on capital gains for assets held longer than 12 months. The policy rationale has historically been straightforward: encourage long-term investment, entrepreneurship, capital deployment and economic risk-taking.
Under emerging reform proposals, the current discount may be replaced with a pre-1999 style inflation indexation model, under which only the inflationary component of a gain is disregarded for tax purposes.
On paper, that sounds reasonable.
In practice, however, founder equity is fundamentally different from traditional passive investments.
A property investor purchasing a mature asset with significant leverage may derive a substantial portion of appreciation from inflation and market movement. By contrast, startup founders usually begin with nominal share capital — often only a few dollars — and spend years creating value through intellectual property development, hiring, fundraising, dilution, customer acquisition and relentless execution risk.
That value creation is not inflationary.
It is entrepreneurial.
And that distinction matters enormously.
Why Unicorn Founders Could Be Hit Hardest
Most startup founders commence with an extremely low cost base in their shares. If a business later achieves a billion-dollar valuation or liquidity event, indexation relief provides comparatively little benefit because the original acquisition price was nominal.
The gain is therefore almost entirely exposed.
The practical consequence is that founders of successful startups may ultimately be taxed on close to the full economic gain generated from years — sometimes decades — of commercial risk-taking.
That creates a dangerous incentive structure.
Founders make critical decisions very early:
where to incorporate;
where intellectual property is owned;
where capital is raised;
where employees are hired;
where holding companies are established; and
where they themselves become tax resident.
If Australia becomes comparatively unattractive from a post-tax capital perspective, the risk is not simply that founders leave after succeeding.
The greater risk is that Australian unicorns are never Australian in the first place.
The next Canva, Atlassian or Airwallex may instead be incorporated in Silicon Valley, Singapore, Abu Dhabi or Dubai from inception, with Australia merely supplying the talent before losing the economic value creation offshore.
That outcome would have profound implications for Australian employment, venture capital ecosystems, sovereign innovation capability and long-term tax revenues.
The Debate Is Expanding Beyond Property
One of the more significant developments in recent weeks has been the growing commentary suggesting that the proposed reforms may apply broadly across asset classes rather than being confined solely to investment properties.
Reports have referenced possible application to:
shares and managed investments;
startup founder equity;
business sale proceeds;
trust structures;
farms and family enterprises; and
potentially broader wealth transfer mechanisms.
That possibility has caused increasing concern within private business, venture capital and accounting communities.
The issue becomes particularly acute for established founders approaching:
succession planning;
retirement;
partial liquidity events;
management buyouts; or
intergenerational transfers.
Many Australian business owners have spent decades building enterprise value inside companies or trust structures. If realised gains upon succession or sale become materially more taxable, the practical effect may resemble a form of indirect inheritance taxation — particularly where liquidity must be generated merely to fund tax obligations.
Australia Risks Punishing Productive Risk-Taking
The Government’s stated rationale for reform has largely focused on housing affordability and intergenerational equity.
However, there is a legitimate question as to whether broad-based CGT reform risks penalising productive investment alongside speculative investment.
A founder building export technology, scaling an Australian SaaS platform or commercialising intellectual property is economically different from passive property speculation.
Treating those outcomes identically for tax purposes may produce unintended distortions.
At a time when Australia continues to face productivity challenges and global competition for capital and talent, policymakers must carefully consider whether reforms designed to address housing concerns inadvertently undermine entrepreneurial ambition.
Because once founders decide to build elsewhere, bringing them back becomes extraordinarily difficult.
What Founders and Investors Should Be Considering Now
Importantly, no final legislation has yet been enacted and there remains significant uncertainty regarding the scope, commencement dates and grandfathering provisions of any reforms.
However, history demonstrates that major tax reforms can occur quickly once political momentum develops.
Accordingly, founders, investors and business owners should proactively review:
holding structures;
shareholder arrangements;
residency positions;
trust and succession frameworks;
employee equity plans;
intellectual property ownership structures;
cross-border structuring opportunities; and
business sale preparedness.
For many groups, the current period before any legislative implementation may represent a critical strategic planning window.
How Paradise Charnock Hing Can Assist
At Paradise Charnock Hing, we advise founders, investors, family offices and privately held businesses on sophisticated structuring strategies designed to preserve equity value, manage succession outcomes and minimise unnecessary tax exposure within the framework of Australian law.
This includes advising on:
founder and shareholder arrangements;
startup and venture capital structures;
trust and corporate restructuring;
residency planning;
cross-border holding structures;
intergenerational succession planning;
business sale preparedness; and
governance documentation supporting long-term capital preservation.
The current CGT debate is no longer simply about property.
It is about whether Australia remains a country where ambitious founders choose to build globally significant businesses — or whether the next generation of Australian unicorns will increasingly be born overseas.