Key Takeaways
- • The Productivity Commission urged the Australian government to make venture capital tax concessions more flexible so viable startups do not miss out on funding, according to an interim report on business dynamism published Thursday night.
- • The commission proposed letting both regular and early-stage VC partnerships invest outside tax concession eligibility criteria, which would reduce the need for complex fund structures.
- • The report recommends recognising SAFE (Simple Agreement for Future Equity) notes at the time of investment rather than waiting until they convert into shares.
- • The commission also recommended allowing VC funds to draw on a broader pool of experienced investors.
- • The commission warned Australian productivity growth has stalled and that a slate of reforms is needed to restore business dynamism.
Summary
The Productivity Commission has urged the Australian government to make venture capital tax concessions more flexible, warning that some viable startups may not secure funding under current settings. The recommendations appear in an interim report on business dynamism published on Thursday night, 5 November 2026.
Among the proposals, the commission recommended changing regulations to allow venture capital funds to invest more flexibly and to draw on a broader pool of experienced investors. It also proposed allowing both regular and early-stage VC partnerships to make investments outside the tax concession eligibility criteria, a change intended to reduce the need for complex fund structures. In addition, the commission recommended that SAFE notes be recognised when an investment is made, rather than when they convert into shares.
The report's release came shortly before the US Bureau of Labor Statistics reported that US labour productivity rose at its fastest pace in a year in the third quarter, with business output per hour increasing at an annualised rate of 3.6%, up from 2.1% in the previous quarter. Against that backdrop, the Productivity Commission warned that Australian productivity growth has stalled and that a slate of reforms is needed to restore business dynamism.
Among the proposals, the commission recommended changing regulations to allow venture capital funds to invest more flexibly and to draw on a broader pool of experienced investors. It also proposed allowing both regular and early-stage VC partnerships to make investments outside the tax concession eligibility criteria, a change intended to reduce the need for complex fund structures. In addition, the commission recommended that SAFE notes be recognised when an investment is made, rather than when they convert into shares.
The report's release came shortly before the US Bureau of Labor Statistics reported that US labour productivity rose at its fastest pace in a year in the third quarter, with business output per hour increasing at an annualised rate of 3.6%, up from 2.1% in the previous quarter. Against that backdrop, the Productivity Commission warned that Australian productivity growth has stalled and that a slate of reforms is needed to restore business dynamism.
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