‘Narrow’, ‘complex’: Innovation and investment reforms slammed

“The Department of Industry, Science and Resources is continuing to finalise safe harbour arrangements to provide investors with certainty about the innovation requirements,” he said.

The reforms to the R&DTI focus on core R&D activities that are experimental and contribute to the development of new knowledge, Chalmers said.

Accounting professionals shared several concerns around complexity and scope with Accountants Daily about the proposed reforms.

Policies could chip away at benefits

Heaney Business Group director Gemma Heaney said the IBCC concession is “unnecessarily complex and narrowly targeted”.

“From a small-practice perspective, the difficulty is not simply understanding whether an investment qualifies today, but providing clients with sufficient certainty that the concession will remain available when they eventually exit,” Heaney told Accountants Daily.

She continued that the innovation criteria, predominant activity requirements, registration obligations, and interaction with existing concessions could create significant compliance and advisory challenges.

Heaney is also concerned about certain elements of the R&DTI, namely around removing the eligibility for supporting R&D activities, which she said could undermine the intended benefits.

“Research and development doesn't happen in isolation,” she said.

“Supporting activities can be essential to delivering a successful project, and excluding those costs may substantially reduce the incentive available to businesses undertaking genuine innovation. Increasing the minimum expenditure threshold to $50,000 also risks excluding smaller businesses undertaking legitimate, early-stage R&D unless they engage an approved research provider.”

From a practical perspective, Heaney questioned whether the reforms proposed by the government “genuinely” simplify the system or just shift complexity into determining which activities and businesses qualify.

“Ultimately, we should be encouraging innovation at every stage, including smaller businesses taking their first steps into R&D, rather than creating additional barriers to participation,” she emphasised.

Only small portion would qualify for IBCC

Senior tax trainer at TaxBanter Michael Gilmour said “it is telling” that the IBCC was not a part of the initial CGT changes announced in the budget.

“The IBCC, first proposed by the Federal Government on 18 June 2026, is an afterthought on behalf of the government, reflecting the significant negative reaction from the Australian business community to this year’s budget,” Gilmour told Accountants Daily.

Gilmour said the legislation has relaxed some of the initially proposed strict criteria in three ways. First, he said that the initial proposal that shares would need to be held for at least five years has been reduced to a minimum three-year holding period.  

Secondly, the requirement that the shares subject to the concession were acquired within the first 10 years of a company’s incorporation has been relaxed and replaced with a first 15-year eligibility period, he said.

Finally, he said, the initially proposed lifetime cap on the concession has also been removed.

“That said, it will still be only a small sliver of taxpayers that will ever qualify for the IBCC 50 per cent CGT discount,” he said.  

“Moreover, the criteria remain strict, and in some regards, very subjective. The criteria that the company is ‘focused on developing for commercialisation a new or significantly improved product, process, service or method’ will be difficult to apply in practice.”

Gilmour said the proposed safe harbours on particular requirements, to be issued by the Industry Secretary by legislative instrument, would help taxpayers and their advisers. 

“But these safe harbours are themselves based on a list of arbitrary calls,” he said.

“The fruits of tax reform that is well considered should not be so difficult to practically apply.”

‘Gated regime wrapped in red tape’

Hilltop Tax Advisory principal Gavin Quayle criticised the bill’s mechanics for “missing the mark completely”, and flagged that taxpayers would need to pay for advice just to determine if they qualify, and how to keep qualifying until they exit.

“While the intent of a start-up concession is to be applauded, it belongs in the general CGT law, self-assessed in the return like everything else. Instead, we get a heavily gated regime wrapped in red tape,” Quayle said.

“An investor can do everything right and still lose the concession through an inadvertent slip by the company, with the ATO free to claw it back. It is a tainted measure born out of a wider package of bad policy, and another example of a government delivering token CGT carve-outs to create the illusion of considered tax reform.”

Quayle said he expects the legislation to pass largely unmodified in the current parliamentary environment.

“Despite being infected with superfluous compliance obstacles, it will still deliver welcome concessions for those who qualify and keep meeting the ongoing conditions, and we’ll likely be stuck with it at least until the next election,” he said.

Proof is in the IBCC pudding

William Buck partner Jonathan Larosa supported the IBCC and called it a meaningful income tax concession for those who invest in innovative businesses.

“We believe there’ll be a broad take-up of the IBCC by our clients given the potential value of a 50 per cent CGT concession for founders, investors and employee share scheme participants,” he said.

However, he pointed to key practical issues, including that obtaining and retaining access to the IBCC is going to be a complex process for all innovative businesses, “and harder still for those with limited cash reserves”.

“Further practical issues will surface when we actually start applying the IBCC,” Larosa told Accountants Daily.

“There’ll be innovative businesses who should qualify on principle but who’ll miss out due to the number and complexity of access conditions.”

Larosa said William Buck’s treasury submission letter asked for clarification on loosening the predominant activity test requirements for start-up businesses, limiting the 15-year history grouping requirement to only corporate controllers, and increasing the annual reporting period from 30 days after year-end.

He noted that a number of these were contained in the bill.