Labor MPs expect eventual concessions for startups after backlash to CGT changes | Tax
Labor MPs expect the government to agree capital gains tax concessions for start-ups after a meme-fueled backlash to the budget; Some are wary that Anthony Albanese and Jim Chalmers’ scare campaigns could “get out of control” unless a clearer explanation of the changes is made.
Guardian Australia spoke to a number of Labor MPs across the country. Some MPs who spoke on condition of anonymity said they wanted to see changes to the CGT, with some contacting Chalmers’ office directly.
“If an unintended consequence has caused a headache, let’s fix it,” a Labor MP said of the CGT changes that have dominated media headlines all week.
But some Labor MPs say they believe the government will eventually decide on some form of preferential treatment for new ventures, given the unique environment of such businesses and concerns about how the new cost-based inflation model will affect them in ways that other businesses may not.
Others said that while they were confident that the negative guidance and CGT changes were ultimately good and important changes, the government needed to do a better job of explaining and “selling” the reforms.
Another Labor politician worried that the government was failing to explain complex tax changes effectively, complaining: “I don’t think we necessarily have a clear strategy on complex issues.”
The CGT changes, which include replacing the 50% tax deduction on profits with “cost-based indexation” – a post-inflation profit tax – and a minimum tax rate of 30%, have been fiercely opposed by some tech founders and small business owners, with a social media campaign mocking Albanians in AI-generated memes.
While early-stage startups with little cash flow often offer employees equity or stock options in the company in lieu of higher pay, founders may be motivated to take risks on new ventures with a big potential payday when selling their company.
The Australian Technology Council has warned both could be affected by CGT changes.
Industry minister Tim Ayres hinted at some concessions to startups, telling Sky News on Thursday that the government wanted to “make sure these changes happen in the right way” that “supports the dynamism” of this sector.
“Them [startups] They are in a different situation. “We are working carefully with this community and the technology sector because it is in the national interest,” Ayres said.
“There are some implementation questions, and I know from my conversations with this industry that there is plenty of room for a good discussion here.”
Privately, senior government sources have been reluctant to indicate that CGT concessions are a possibility or even put a timetable for the consultation process.
A Labor MP described the business community’s reaction as an “unintended consequence”, saying they hoped the government would at least consider making changes. Another MP said they were confident the consultation would lead to some form of concession model for start-ups.
Two more Labor MPs said they were concerned the government had not adequately communicated the complex changes and needed to push back against growing misinformation online.
Referring to Bill Shorten’s two election losses, one MP has warned that the tax reform issue “could spiral out of control, as it did last time, with negative gearing” and the government needs to make sure it is “substantive”.
Labor MP Jerome Laxale said there were “difficult decisions” in the budget but the government should not be deterred by criticism from some quarters.
“Progressive change is always difficult to achieve,” he said. “These are difficult decisions, but they are the right decisions for the right reasons.”
