The Australian Government has proposed changes to the taxation of capital gains as part of the broader housing affordability and tax reform. We've pulled together an overview of the proposed changes and outlines the potential considerations for Digital Software Providers (DSPs).
For Australia's digital software industry, the proposed changes may influence investment decisions, founder incentives and the ability of growing businesses to attract capital. This is particularly relevant for technology businesses where long-term value is often created through equity growth rather than immediate returns.
Proposed Reforms
While the proposed reforms have largely been discussed in the context of residential property, they may also have broader implications for Australia's digital software industry. The Government has also announced further implementation details, including a proposed increase to the small business active asset CGT reduction turnover threshold from $2 million to $10 million, and is consulting on a new Innovative Business CGT Concession for startups.
The table below summarises the key proposed reforms and their relevance to Digital Software Providers.
| Area |
Proposed Changes | Why This Matters |
| Transition |
Existing accrued gains are expected to retain the current CGT discount treatment, with the new rules applying prospectively. | Provides greater certainty for investments made before the reforms commence. |
| Scope | The proposed changes apply to individuals, trusts and partnerships rather than companies. | The impact will vary depending on business ownership and investment structures. |
| Tax | Introducution of a 30% minimum tax rate on realised capital gains. | influence the after-tax return on investments in founder-led software businesses. |
| Concessions | Replacement of the 50% CGT discount with indexation of the cost base for eligible assets held more than 12 months, applying to gains arising after 1 July 2027. | affect the long-term value of equity investments for founders and investors. |
Potential Impacts
Software businesses often rely on long-term investment, founder equity and employee share schemes to support growth. The extent of these impacts will depend on the final legislation and any concessions introduced through consultation.
| Area |
Potential Impacts | Why This Matters |
| Incentives | Lower after-tax returns may influence decisions to establish, grow or sell founder-led businesses. | Many DSPs rely on long-term equity growth as a reward for years of investment and innovation. |
| Investment | Australian angel investors and family offices may reassess investment decisions or expected returns. | Reduced investment appetite could affect access to growth capital for emerging software businesses. |
| Schemes | Equity may become a less attractive tool for attracting and retaining skilled employees. | Many growing DSPs use equity to compete for talent where they cannot match enterprise-level salaries. |
| Innovation | Reduced investment may slow product development, cyber resilience initiatives and regulatory capability. | Ongoing investment is essential for DSPs to respond to changing legislation and customer expectations. |
| Growth | Businesses may delay expansion, hiring or entry into new markets. | Continued investment supports innovation, productivity and the broader digital economy. |
| Software | DSPs above existing concession thresholds may not benefit from proposed relief despite remaining relatively small businesses. | Current concession settings may not fully reflect the characteristics of modern, founder-led software businesses. |
Why This Matters
DSPANZ represents organisations that develop software supporting payroll, tax, payments, superannuation, eInvoicing, digital identity and regulatory compliance. These businesses provide essential digital infrastructure relied upon by employers, businesses and government across Australia.
For many DSPs that are founder-led businesses continually invest in product development, cyber resilience, compliance and customer support. Access to investment capital enables DSPs to respond to legislative change, strengthen digital capability and continue innovating.
Changes that influence investment decisions may therefore have broader implications for innovation, business growth and Australia's digital economy.
Our Position
DSPANZ recognises the Government's broader policy objectives. As consultation continues, it is important that any final reforms continue to encourage investment in innovation-driven businesses that support Australia's digital economy.
DSPANZ believes that any final reforms should:
• recognise the contribution of Australia's digital software sector
• support continued investment in innovation
• preserve founder and employee equity incentives
• ensure concession settings remain appropriate for modern software businesses
• provide certainty and adequate implementation time
DSPANZ will continue engaging with members and Government throughout the consultation process, advocating for practical policy settings that support innovation, investment and sustainable growth across Australia's digital software industry.