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FinTech Australia has urged Treasury to revise the proposed Innovative Business Capital Gains Tax Concession, warning that its current design would leave most fintech startups ineligible.
In its submission, the industry body made 10 recommendations to reshape the concession to reflect better the economics and regulatory demands of financial technology businesses. It argued fintech should be treated similarly to biotech, as both sectors face high upfront costs, long commercialisation timelines and significant regulatory burdens.
The proposed changes focus on giving founders, staff and investors greater certainty. FinTech Australia wants eligibility to be determined, as far as possible, when investment or employment decisions are made, rather than years later when tax outcomes become clearer.
That includes a call for more objective eligibility tests. The submission argued that innovation should be recognised through clearer criteria and guidance, rather than through a subjective, ongoing assessment that makes access to the measure harder to judge.
It also asked the Treasury to create a mechanism that allows companies and investors to obtain a binding eligibility determination before shares are issued. Under that approach, the decision would remain in force for the relevant share issue rather than being reassessed across later funding rounds.
Sector concerns
FinTech Australia also raised concerns about applying existing Venture Capital Limited Partnership and Early Stage Venture Capital Limited Partnership exclusions to the new concession. It argued that those settings should be reviewed so innovative financial technology businesses are not shut out simply because they operate in a regulated industry.
The submission also examined how the concession would interact with employee share schemes and common business transactions. It said the design should reflect standard commercial practice so acquisitions, restructures, and established holding arrangements do not unintentionally remove access to tax relief.
Another disputed area is the proposed AUD $10 million lifetime cap. FinTech Australia urged Treasury to consider replacing it with a reinvestment-based deferral model similar to the approach used in the United Kingdom. If a cap remains, it said the limit should be tied to the amount of capital invested or to another investment-based measure, rather than to aggregate lifetime realised gains.
The association also wants the proposed turnover threshold raised to AUD $75 million. It argued the current threshold does not reflect the commercial realities of regulated growth businesses and should be indexed over time so inflation does not erode its purpose.
On the company's age, the submission said a 10-year incorporation limit is too restrictive for businesses that can take a long time to mature. It called for either an extension beyond 10 years or the replacement of the age test with another objective measure of business maturity.
FinTech Australia also called for periodic indexation of all monetary thresholds within the concession, arguing this would preserve their real value and reduce the need for repeated legislative amendments.
Economic role
The submission said the issue is particularly significant for an industry that already makes a sizeable contribution to the national economy. Analysis by Deloitte found fintechs contribute AUD $13.6 billion in direct value to Australia.
Rehan D'Almeida, Chief Executive Officer of FinTech Australia, said the proposed rules would harm the sector if adopted in their current form.
"The Government's proposed CGT concessions for startups will place Australian financial technology (fintech) startups at a unique disadvantage and irrevocably damage local innovation.
"Almost all fintech startups will be ineligible for the proposed Innovative Business CGT Concession (IBCC) if it goes ahead. Worse, as it stands, founders, employees and investors will not be able to understand or confidently rely on the IBCC when making commercial decisions; it will take years for them to know whether their companies, employee equity schemes and investments will benefit from the IBCC.
"Similar to biotech, fintech is one of the most expensive and riskiest businesses to launch. These companies require significant upfront investment, operate in highly regulated and intensely competitive environments, and often take many years to reach commercial scale. Because returns come late, if at all, access to consistent long-term capital is critical.
"Fintechs must also recruit from the lucrative corporate financial services sector, which is challenging without the long-term incentives of employee equity. By excluding most fintechs, the IBCC undermines both, making it an existential threat to the sector."
The submission's final recommendation focused on transitional arrangements. It said the rules introducing the concession should be simple to administer, supported by clear guidance and examples, and designed so as not to deter future investment by companies that would otherwise seek to use the measure.