Response to the Innovative Business CGT Concession – exposure draft legislation

This submission to Treasury responds to the exposure draft legislation for the Innovative Business Capital Gains Tax (CGT) Concession (IBCC), part of the Treasury Laws Amendment (Tax Reform No. 5) Bill 2026, which aims to encourage early-stage private investment in innovative Australian businesses. Research Australia supports the objective and welcomes changes made after initial consultation: extending business eligibility to 15 years, reducing the minimum holding period from five to three years and removing the lifetime cap. It maintains that health and medical research businesses depend on patient capital to cross the ‘valley of death’ between public research and later private investment, noting that Australia produces about 2.1% of global scientific publications but sits outside the top 20 for commercialisation, and that each dollar invested in health and medical research returns close to $4. It contends that the 15-year age limit is still too short for medtech and biotechnology companies facing long clinical, regulatory and reimbursement pathways, and prefers removing it, or allowing extensions based on evidence of continued innovation. It recommends innovation tests that recognise pre-revenue, intellectual property-intensive businesses and clinical and regulatory milestones; clarification and worked examples on how turnover, control, share issue and prior intellectual property rules apply to university and medical research institute spinouts; an Australian Spinouts Register; and coordination of the IBCC with the R&D Tax Incentive, venture capital programs, MRFF and NHMRC funding, and an Australian equivalent of the US Biomedical Advanced Research and Development Authority (BARDA).