Will Labor's capital gains tax changes drive startups and investors overseas?

Updated 3 November 2026 with the latest figures.

On 30 October 2026, Wentworth independent Allegra Spender said businesses and investors in her electorate are talking about moving overseas. She called Labor's capital gains tax changes "bad for innovation and it's not competitive internationally" (The Nightly). Her warning came three days after Jim Chalmers introduced the bill that carves startups out of the new rules (Treasury).

The main change passed Parliament in June 2026 (Accountants Daily). From 1 July 2027, the 50% capital gains tax discount goes and only gains above inflation are taxed, with a minimum rate of 30% (Perpetual).

The startup carve-out cleared the House on 29 October, but still needs the Senate (VitalLaw). A Senate committee reports on 13 November, and the government wants the package passed later that month (Sterlinx Global).

The stakes run past a few tech founders. Every share investor, property investor and family trust outside the carve-outs pays the new rates. So will founders and their backers pack up?

A few will, mostly fast-growing companies past the carve-out's limits and foreign talent that never arrives. A broad exodus is unlikely, because most young startups keep today's 50% discount and leaving Australia doesn't wipe the tax bill. Confidence: Likely.

Three parts to this: who pays more, how Australia compares, and how people actually move.

The new Innovative Business CGT Concession gives founders, staff and investors a 50% discount on qualifying shares. That is the same deal they get now.

Chalmers says the bill gives "more certainty for investors and more incentives for innovation". To qualify, a company must turn over less than $50 million, be under 15 years old and pass activity and Australian workforce tests, with shares held for three years (SmartCompany).

The bill eased those tests from the September draft. A firm now needs more than 50% on two of three measures (assets, staff and income), down from 75%, and contractors count as staff (Startup Daily).

Small business owners selling up also keep their concessions. The government has announced it will lift the turnover limit for the extra active asset discount from $2 million to $10 million.

So the money mostly sits elsewhere. The Parliamentary Budget Office puts the discount's cost at $21.79 billion in 2025-26: $8.92 billion on property, $7.63 billion through trusts and $4.61 billion on shares.

About 82% goes to the top 10% of earners (PBO). The founders Spender worries about are the ones who outgrow the carve-out.

Indexation helps slow assets and hurts fast ones. Take $100,000 that grows tenfold in seven years, with 2.5% inflation and a 47% top rate. Today the tax is 23.5% of the gain.

From 2027, outside the carve-outs, it is about 46%, on our maths. That's because inflation explains only about $19,000 of a $900,000 gain.

That is above Denmark's 42%, the highest rate on shares in Tax Foundation's 2026 European table (Tax Foundation). The UK charges 24%, or 18% for business sellers under its relief scheme (GOV.UK).

America is the real rival. Its top federal rate is 20% plus a 3.8% surtax (Tax Foundation). Founders in qualifying small companies can pay nothing on up to US$15 million of gains after five years (Cozen O'Connor).

A slow asset tells the opposite story. A 30% rise over the same seven years will cost 17.4% of the gain, down from 23.5%.

Moving overseas doesn't erase the gain built here. When you stop being a resident, the law treats your assets as sold at market value, or keeps them in the tax net if you defer (Pitcher Partners).

Startups already move their holding company to Delaware, but for American investors, customers and buyers, with tax a side issue (AirTree). A study in the American Economic Review found top inventors born in a country barely respond to its tax rates (elasticity about 0.03). Foreign stars respond more than 30 times as much (NBER).

Norway shows the risk is real but narrow. After wealth and dividend tax rises, an average of 44 people worth over 100 million kroner left each year in 2022 and 2023, while only three arrived (The Local Norway).

Norway's finance ministry said investment conditions matter more than the head count. Dozens of departures a year are a real loss, but they are not a collapse.

The Tech Council's Kate Cornick said the startup concession "falls significantly short" (Tech Council). Her group wants the $50 million ceiling doubled and indexed, warning that the highest-potential scaleups will be excluded (Startup Daily). The bill as introduced on 27 October kept the ceiling at $50 million.

Spender's own fix keeps indexation for property but offers a 40% discount for businesses and shares (ABC). Former Reserve Bank board member Jillian Broadbent backs her approach.

They are right that the cliff sits where value is created. A firm past $50 million in turnover can be worth far more than that, and its next gains are the fast kind that indexation taxes hardest.

Where the evidence pushes back is on scale. Home-grown inventors are the least tax-mobile group in that study, and the bill on gains made here follows them out the door.

Nobody has published a count of Australians who left for tax reasons, so the exodus claim rests on anecdote. The verdict also assumes the Senate passes the carve-out roughly as drafted.

Labor's tax changes will push a few fast-growing founders and investors offshore, but most young startups keep today's deal. Confidence: Likely. Property and share investors outside the carve-out pay more, while the US gains an edge for scaleups.

This piece draws on 23 sources, including five primary or peer-reviewed sources (two Treasury documents, the PBO, GOV.UK and the NBER study). No official count of tax-driven departures exists, so that claim stays unverified. Effective rates are our own arithmetic, assuming 2.5% inflation, a 47% top rate and assets outside the carve-out. Updated on 3 November 2026 with the bill's passage through the House. Researched with AI tools; checked and edited by VOID.

From mid-2027, Australia taxes investment gains above inflation at full income tax rates, which hits fast-growing assets hardest. Young startups get a carve-out that keeps today's half-off deal, so most founders aren't worse off. The ones who might leave are fast-growing firms past $50 million in turnover, and moving abroad doesn't erase the tax on gains already made here.