Tech entrepreneurs are mocking the government’s capital gains tax changes by posting an AI-generated photo of Anthony Albanese as a “new founder” and warning that higher taxes could push people away from working in new businesses and cause startups to go overseas.
The Federal Government’s planned changes to CGT discounts could see start-ups and entrepreneurs receive a carve-out, with the Chancellor saying he wants to support innovation and Treasurer Jim Chalmers saying discussions with the sector were continuing.
The CGT changes, which would replace a 50% tax discount on profits with a “cost-based sliding scale” meaning a tax on profits after inflation and a minimum tax rate of 30%, were strongly opposed by some tech founders. Early-stage startups with low cash flow often offer employees stock or stock options in exchange for higher salaries, but founders can be motivated to take risks in new ventures because of the prospect of higher pay when they sell their companies. The Australian Technology Council warned that both could be affected by changes to CGT.
“Work needs to be done to ensure Australia’s startup community does not become collateral damage as a result of the proposed changes,” the council’s chief executive Kate Cornick said.
Shadow treasurer Tim Wilson has warned of “founder flight” overseas. Janine Aris, co-founder of Boost Juice, also warned that reducing CGT discounts would stifle innovative businesses.
After Budget Night, a small trend emerged among startup founders, with several posting AI-generated photos of Albanians in their offices.
“He is having a great time with his new 47% stake,” wrote Jack Greif, founder of communications app Kinso. He posted an AI image of the prime minister in his office with staff coding products and working with customers.
“With the tax reform, [the] The incentive to grow the business is significantly reduced, but all the usual risks remain,” Mr Greef told Guardian Australia, warning that low returns on equity would make it difficult to attract talented employees.
“Australia should encourage young founders to build the next Canva. My fear is that they won’t even try now, or worse, they’ll go overseas and build the next unicorn and Australia will miss out completely.”
Julian Fayad, CEO of loan comparison platform LoanOptions.ai, posted an AI image of Albanese sleeping in his company’s office and scrolling on his phone. He also warned of the impact on attracting workers and risk-taking.
Mr Fayad took part in a roundtable discussion hosted by Mr Wilson in Sydney on Saturday, where the founders criticized the government’s changes, and joined the shadow treasurer at a subsequent press conference.
“With a CGT of 47%, the government’s message to founders like me is that if we succeed, we want nearly half of our hard-earned rewards,” Fayad said.
“When you look at what countries like Singapore and the United Arab Emirates are doing to attract and retain founders – the incentives, the structures, the real support – and then look at what Canberra is doing, you can’t help but feel abandoned and held back.”
Alfie Robertson, founder of video editing app Roll, recorded a podcast at the gym and posted an AI image of Albanese working on strategy. He was also concerned that startups could look overseas.
“It’s not just taxes that are a concern,” he says. “It’s the incentives that matter. Policies like this shape how founders choose to build, invest and stay.
“If Australia wants to compete globally for talent and innovation, we should reward those who take productive risks to set up businesses, create jobs and grow our economy, not reduce the incentives to do so.”
Asked about Friday’s backlash, Albanese said he supports the startup sector, citing various budget incentives for research and development and immediate asset write-offs. Chalmers acknowledged that startups may have a “different kind of cost base” than other industries.
“We have already been working with the technology sector, particularly the venture capital and start-up sectors, to ensure that we make changes that accurately reflect the contributions we want to make to really important parts of the economy,” he said.
Mr Cornick said the Tech Council welcomed new R&D tax incentives and venture capital regulatory reform and was keen to continue the consultation on CGT.
Economist Saul Eslake said CGT, particularly new businesses starting from scratch, may need more lenient treatment as they may be paying tax on all their profits because there is no cost basis to index them. He supported the government’s move to change CGT on property and shares, and while he said it was not unfair to expect start-up founders to pay tax on business profits, he acknowledged that some new businesses, such as start-ups, may need incentives to encourage innovation and risk-taking.
“There are still very strong incentives,” Eslake said. “If instead of becoming a millionaire you made $800 million, would that be less of an incentive?”
Another economist, Chris Richardson, warned that it would be a mistake to “bend” CGT.
He said incentives such as research and development tax offsets and immediate asset write-offs are better than carving out future profits to support early-stage businesses. Mr. Richardson also supported a broader move to tax income from property and income from work more equally.
“There’s a quote by Warren Buffett: “A man with a great investment idea may not implement it because of the taxes he has to pay when he succeeds. Send him away and I’ll take the burden off him.”
