Fund manager, business groups and tech execs reject Treasury’s CGT startup concession plans
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The news: Wilson Asset Management has slammed the Albanese government’s proposed concession on CGT arrangements for innovative startups, calling for the 50% CGT discount to be retained for “productive Australian assets”, and any housing-related reforms to be considered separately.
Treasury is also facing pushback from a major industry association and key figures in the tech community.
The context: In a submission to Treasury lodged on Friday but circulated to the media on Monday morning, the Sydney-based investment manager said the government’s planned carve-out reinforces “higher taxes on productive, risk-bearing capital discourage investment in Australian businesses, entrepreneurship, innovation and productivity”.
WAM said if the government proceeds with the concession, eligibility should extend to every registered Australian company, including businesses raising growth capital on the ASX. However, the “cleanest and least-distortionary response” would be to retain the 50% CGT discount, it said.
WAM’s submission follows a letter signed by a dozen tech executives to Treasurer Jim Chalmers warning the proposed tax concessions would send startup investors and founders offshore.
Under what the government has labelled its “Innovative Business CGT Concession”, eligible shareholders in “innovative and active” startups would have the option to calculate their CGT liability against the existing 50% discount. They could also use cost base indexation and the 30% minimum tax when they realise a capital gain.
The startups must have less than $50 million in turnover and be incorporated for less than 10 years.
Australian Industry Group CEO Innex Willox, in a media statement circulated over the weekend, said the “complex rules to carve out startups ... will make it too hard for companies to actually qualify”.
While Willox supports a carveout for innovative businesses, he said many that genuinely count in this category would fail to qualify under the criteria and others will “be unnecessarily burdened with administrative requirements and behavioural distortions”.
What they said: “The government is trying to create a narrow carve-out for startups because it knows its broader capital gains tax changes will hurt startup investment,” said WAM chair and chief investment officer Geoff Wilson.
“That is not tax reform. That is an admission the reform is flawed. You cannot fix a structural problem with a narrow, conditional and capped concession.
“Australia needs a tax system that directs capital towards productive Australian businesses, not one that discourages investment and innovation.”
The source: WAM media release
