Treasurer Jim Chalmers says he’s working through a startup-specific proposal to address fears for Australian innovation after he announced an overhaul capital gains tax overhaul in the May budget.
The proposed changes end the current 50% discount, shifting CGT to cost-base indexation and a 30% minimum tax. It sent shockwaves through the startup sector, generating the loudest founder and investor backlash Canberra has seen in years.
A Senate inquiry sat for two days this week hearing from the likes of Eucalyptus founder Tim Doyle and Tech Council CEO Dr Kate Cornick about the potential impact. The tech sector has fought hard to get a seat at that table amid academics, economists and tax experts.
Greens senator Nick McKim is on the committee, along with fellow crossbencher David Pocock. They both asked plenty of questions.
More time needed
The legislation, which many consider rushed and underbaked, has already passed the lower house, where the Labor government has a majority. But for the Budget changes to become law, they need Senate approval, and the 19-strong crossbench, including 10 Greens, hold the balance of power. The government needs to convince at least nine Senators to get its bills past.
Many of the 280-plus submissions to the inquiry urged the Senators to recommend delaying passing the legislation until the details are more carefully constructed.
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The bills also include changes to the R&D tax incentive that have deep tech startups, which can take more than a decade – the timeframe the government wants to introduce a cut off at – to bear fruit.
As Cornick told the committee, it’s not unusual for R&D investments in areas such as the energy transition to take 10 years before producing a return.
“We see across the economy, including climate tech, there are areas where businesses need extended timeframes to manufacture product,” she said.
It’s an area Senator McKim should think carefully about and discuss with his Greens colleagues.
If climate tech rides into the carve-out as a footnote within a generic “startup” definition, based on the traditional local venture capital obsession with software economics, it will fly in the face of Greens policy – and Labor’s.
How climate tech leads the debate
The startup sector also needs to advocate fiercely for one of its most important and effective subsets, or risk squandering the strongest case in the entire debate. Climate tech has the public money, a bipartisan story and the employment numbers to argue for explicit treatment, rather than wearing a borrowed definition.
The government has already committed billions in taxpayer funds to climate tech startups that it’s now putting at risk.
Across the Clean Energy Finance Corporation, ARENA, the National Reconstruction Fund, Future Made in Australia and the various hydrogen and critical minerals incentive schemes, Canberra has put close to $60 billion behind the energy transition. That capital was never designed to do the job alone. It exists to underpin private investment, often at multiples of the public dollar. That multiplier only works if the after-tax return for private investors holds up at the point they actually take that risk.
Push CGT changes through without recognising how early-stage climate equity behaves, and you don’t just tax startups more heavily, you quietly devalue $60 billion of public commitment that was built on the assumption private capital would show up alongside it – and changing the rules leaves subsequent funding in doubt. Do private cut their losses and run at this point? Does this create a new, later stage “valley of death” for climate tech, parched for funding with the finish line in sight?
Then there’s the narrative, which matters more in this debate than most people realise. Climate tech is one of the sub-sectors which connects with a very different and growing audience. Most of the CGT carve-out argument so far has been “don’t punish the people who build high-growth companies.” That’s a fair argument, but it works best in rooms full of founders and investors.
Climate tech lets the same case reach a different audience: households worried about power bills, regional communities watching the energy transition reshape their local economy, and the growing share of voters who want net zero delivered by Australian companies rather than imported off the back of someone else’s industrial policy. A carve-out anchored partly in climate tech gives the wider reform a story that travels further than “protect startup equity.”
The jobs and growth case is just as direct.
The energy transition isn’t a budget line that disappears next cycle. It’s a multi-decade reallocation of global capital that’s happening whether or not Australia participates meaningfully in it (Hint: It’s already and growing day by day). We have real structural advantages here: a critical minerals endowment most countries would kill for, renewable resources to match, and a deep tech base that’s already exporting technology rather than just importing it.
Climate tech jobs also tend to sit outside the CBD, in manufacturing, regional processing, the skilled trades tied to grid, storage and green metals. That’s a different jobs story to most software startups, and a useful hedge alongside it: against energy price shocks, Australia being left holding stranded fossil assets, and supply chain exposure from sitting out the critical minerals race.
Climate tech is an investment in resilience and sovereignty, to use a buzz word that’s risen to prominence amid global supply chain shocks.
And it’s not hypothetical, as Climate Salad’s Mick Liubinskas points out in analysis that found Australian climate tech already employs more than 12,000 people, across a community of more than 800 companies and 125-plus investors.
Investment already there
Private VC funds put close to $1 billion into the sector over the past year, with dedicated climate funds growing their capital pool by almost 50%, led by commitments like REST Super’s $230 million into Wollemi Capital.
That’s your retirement savings doing good, but now facing greater risk from the Budget’s changes.
On the public side, roughly $10 billion in new funding came online in the past 18months alone through Future Made in Australia, ARENA and the National Reconstruction Fund, sitting inside a scheme designed to help mobilise well over $100 billion in total investment.
Amid real, current momentum, it feels like Treasury gives with one hand and takes away with the other.
CGT reform doesn’t just slow a hypothetical future, it interrupts something that’s already working, right when it’s accelerating.
The broader startup carve-out negotiation is happening in Canberra right now, with the Senate inquiry report due on June 19.
Climate tech is not on the starting block, it’s already well down the pool with public capital already committed, a narrative that reaches well beyond the tech sector, a genuine jobs and growth case, and a track record it can point to today rather than a promise for later.
That not only embodies what The Greens say they stand for, it’s a strong business case for Australia.
