Australian Entrepreneurs Warn of 'Disastrous' Tax Changes for Startups

The Australian startup ecosystem is sounding the alarm over potential government changes to capital gains tax (CGT) that could significantly impact the sector. High-profile figures like Paul Bassat, co-founder of Seek, have voiced strong opposition, warning that abolishing the 50% CGT discount on shares would be "disastrous" and could drive entrepreneurs out of the country.

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founders will leave Australia in big numbers

While the rationale behind adjusting CGT for property investments to address housing affordability is understood, the startup community argues for a carve-out. They emphasize that employee share schemes are crucial for attracting talent and retaining staff in a sector that often struggles with cash flow. The prospect of a substantial tax on gains from selling shares, especially for successful startups that reach valuations comparable to Canva or Atlassian, could disincentivize the very innovation Australia needs.

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At a time when we are about to see a tsunami of job shedding by existing businesses, Australia's best hope is a wave of startup innovation. A ~50% tax on gains by founders and team members will have disastrous consequences.

This isn't just about a privileged few seeking special treatment; it's about the future economic landscape of Australia. As venture capitalist Alan Jones points out, employee share ownership is a powerful tool for retention and motivation. The government's potential move, while perhaps aimed at the property market, risks creating significant "unintended consequences" for a vital and growing part of the Australian economy. The debate highlights a tension between short-term fiscal measures and long-term economic strategy, with many in the tech sector urging a more nuanced approach that supports, rather than hinders, homegrown innovation.

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This is not about a pampered sector wanting to be treated differently but a decision about the sort of country and economy we want.