12th May 2026

Ahead of tonight’s Federal Budget, speculation has again emerged around the future of Capital Gains Tax (CGT) concessions and investment incentives in Australia. 

Much of the discussion has focused on property investors, housing affordability and negative gearing. But what caught my eye is a different question entirely: 

What if future tax changes unintentionally make entrepreneurship, i.e. owning a business, less attractive than passive property investment? 

The comparison between a business founder and a property investor is more interesting than many realise.

A founder may spend:

• 7–10 years building a business
• taking little or no salary
• reinvesting cashflow back into growth
• risking personal capital and career security
• employing staff and building intellectual property

And statistically, many of these ventures fail.

The reward, if it eventually comes, is often a single liquidity event many years later, usually taxed under the CGT system. Of course, Australia already provides a range of business-related concessions, including small business CGT relief, ESOP (Employee Share Option Plan) arrangements and early-stage investor incentives. However, many within the broader business and investment community argue the balance between entrepreneurial risk and long-term after-tax reward remains critical to innovation, investment and business formation in Australia.

By comparison, a property investor may:

• borrow heavily using bank funding
• receive rental income throughout the journey
• claim deductions through interest and depreciation
• benefit from long-term asset appreciation
• refinance as equity grows

Importantly, they are often supported by the tax system throughout the investment journey, not just at the end. 

This is where the entrepreneurial argument begins to gain traction. Many founders and venture investors are not arguing against paying tax. Rather, they are questioning whether the tax system properly recognises the nature of entrepreneurial risk.

A founder’s investment is often not just money. It is often years of below-market income, concentrated risk, stress, time away from family, illiquidity and uncertainty. 

One particularly interesting issue is cost base. 

Many startup founders acquire shares at very low values when the business is established. If the current CGT discount were reduced or replaced with inflation indexation, founders could end up with very limited relief because their original cost base was close to zero. 

In contrast, property investors typically have larger acquisition costs that may benefit more meaningfully from indexation approaches. 

Depending on the final design, one unintended result could be that some forms of entrepreneurial wealth creation receive less favourable treatment than certain forms of long-term property ownership.

Whether that is fair is ultimately a political and philosophical question. Supporters of reform argue the current system disproportionately benefits capital accumulation and speculative investment, particularly in housing.

Critics argue Australia already directs too much capital toward property and leverage (debt), and not enough toward innovation, business formation and productivity growth.

Tax policy ultimately shapes behaviour.

If entrepreneurial upside becomes less attractive while property investment remains relatively supported, Australia risks reinforcing an economy increasingly driven by:

• housing
• leverage
• passive asset ownership

rather than: 

• innovation
• productivity
• business creation
• scalable Australian companies

To be clear, none of this means CGT reform is necessarily wrong.

But if changes are announced tonight, or even debated more seriously over coming years, the bigger question may not simply be “How much tax should be paid?”, it may instead be “What type of economic behaviour should Australia be encouraging in the first place?”

That’s what caught my eye!

– Scott

We work with business owners, professionals and complex families navigating long-term financial decisions, investment structures and intergenerational wealth strategy. If you would like to discuss how changing tax and investment settings may affect your long-term strategy, feel free to reach out.

For those who would like to explore the underlying commentary and source material behind many of our observations, contact me for our latest Falconer Advisers Macro Tones link.

As always, What Caught My Eye is intended to highlight the issues we’re spending time thinking about, not to predict outcomes, but to better understand the environment we’re operating in. Remember, this note is general in nature and shouldn’t be construed as personal advice. Always seek financial or investment advice from a professional before acting on anything.