Government’s innovation and investment reforms under the microscope

“The Bill builds on the $3.8 billion in tax relief we are rolling out for businesses and start‑ups through our ambitious tax reform package,” Treasurer Jim Chalmers said on Tuesday.

While the Treasurer sees ambition, those in the profession have called the IBCC unfair for traditional small businesses, a sector that faced 1,366 closures in December 2025, CreditorWatch noted earlier this year.

“Why should investment in a qualifying technology start-up receive preferential tax treatment over a traditional small business?” Belinda Raso, senior accountant and founder of Tax Invest Accounting, told Accountants Daily.

For Raso, the challenge that the government now has is to encourage innovation without leaving Australia's broader small business community behind.

“While targeted CGT relief may help start-ups attract investment, expand and create jobs, it raises concerns about fairness for established small businesses, including trades, retailers, hospitality operators, family businesses and professional services,” Raso said.

CPA Australia tax lead Jenny Wong said that an innovation package should make it easier to invest, experiment and grow.

“There is a lot to welcome in this Bill, but the package is pulling in two directions. It encourages capital to enter innovative businesses while potentially withdrawing cash-flow support before some businesses reach commercialisation,” Wong said.

“In several areas, the rules still risk replacing commercial uncertainty with tax uncertainty.”

Offshore risks: R&DTI legislation faces medical sector

Wong said that a tax incentive only changes behaviour when businesses can understand it, rely on it and factor it into decisions made today.

Australian advocate for life sciences AusBiotech said that the bill failed to meet industry expectations as the 15-year refundable RDTI cap fails to recognise how long it takes to develop medicines.

“Therapies for complex diseases can take well in excess of 15 years to research and develop due to the intensive nature of R&D and clinical trials required. When these companies stay in Australia, they can invest in advanced manufacturing to support their late-stage trials,” said AusBiotech CEO Rebekah Cassidy.

"If the legislation is passed in its current form, the new 15-year time limit risks encouraging early-stage research in Australia while pushing more late-stage R&D, including clinical trials and associated manufacturing activities offshore,” Cassidy said.

“The cumulative impact could be long-lasting damage to our growing medical innovation and clinical trials industry,” she said.

Wong added that it is crucial for the government’s innovation package to make it easier to invest, experiment and grow.

“In several areas, the rules still risk replacing commercial uncertainty with tax uncertainty,” Wong said.

“The government is pressing the accelerator on venture capital while applying the handbrake to parts of the R&D incentive. The package needs to work as a coherent innovation strategy, not as separate tax measures.”

“Innovation policy should support the full journey from experimentation to commercialisation. It should not open the door to investment and then close the window on R&D support.”

Monthly instalments: A penalty?

With the government looking at allowing businesses to pay PAYG income tax instalments monthly instead of quarterly starting 1 July 2027, Raso said that there is a second part of the legislation that needs a closer look.

According to the legislation, the ATO will also have the power to require taxpayers with a demonstrated history of non-compliance to pay monthly.

“The proposed PAYG instalment reforms may provide small businesses with greater flexibility to manage cash flow through voluntary monthly payments,” Raso said.

“However, giving the ATO the power to force businesses with a history of non-compliance onto monthly payments raises serious concerns. Businesses already experiencing financial difficulties could face additional cash-flow pressure and administrative costs.”

“While the Government promotes flexibility, the real question is whether these changes will genuinely help struggling small businesses or simply allow the ATO to collect tax sooner.”