Despite New Zealand’s zero capital gains tax on startup investments, the country’s tech sector lags Australia’s in startup funding, job creation, and economic impact, undermining the notion that CGT reform alone drives startup success.
- NZ startups attracted less than half the per capita capital of Australian startups in 2025.
- Tech sector contributes slightly less to GDP and employs a smaller workforce share in New Zealand versus Australia.
- Property market factors and lack of property tax in NZ complicate capital allocation beyond CGT effects.
What happened
New Zealand’s policy of not imposing a capital gains tax (CGT) on startup investments is often cited as a key competitive advantage, touted as a driver of a booming tech ecosystem and a magnet for capital compared to Australia. However, recent data reveals that New Zealand startups attracted approximately NZ$467 million in funding in 2024, which equates to about NZ$87.32 (AUD$71.38) per capita. In contrast, Australian startups received $5.1 billion in 2025, approximately AUD$182.14 per capita—more than double New Zealand’s capital inflow per capita.
Despite its zero CGT environment, New Zealand’s tech sector accounts for about 8.0% of the country’s GDP and employs around 119,000 technology workers, roughly 4.8% of the workforce. Australia’s technology industry is larger, representing 8.9% of GDP and employing one million people, or about 6.7% of its workforce. These figures highlight that the absence of CGT has not produced a startup or tech industry boom in New Zealand comparable to Australia’s.
Why it matters
The widespread belief that removing CGT automatically stimulates startup investment, innovation, and job creation is challenged by the New Zealand experience. The notion that Australia's recent CGT reforms will drive a capital and talent exodus to New Zealand is not supported by comparative startup funding data or industry size metrics. This suggests broader factors influence ecosystem vibrancy beyond tax reforms alone.
Additionally, New Zealand’s capital markets face challenges distinct from Australia’s, including limited diversification and capital scarcity for startups. The property market’s tax treatment further complicates capital allocation dynamics. New Zealand does not tax investment properties held longer than two years, which impacts investor behavior and contrasts with Australia's tax structure. Therefore, policy discussions around CGT need to consider the full spectrum of economic and market conditions affecting startup ecosystems.
What to watch next
Investor and founder sentiment in both countries will be important to monitor, especially as Australia adjusts its CGT and negative gearing policies impacting property investment. These changes might redirect capital flows towards startups, offering new growth potential within Australia’s tech ecosystem. The balance between property investment incentives and startup financing will shape future ecosystem development.
Stakeholders in both markets should watch for shifts in capital availability and startup performance to discern whether tax reforms materially influence ecosystem growth or if more complex factors, such as market size, venture capital culture, and regulatory settings, play dominant roles. Policymakers may also review whether targeted support beyond tax policy is necessary to nurture startup innovation sustainably.