Legislate first, ask questions later for CGT carve-out
Capital gains tax cuts for newly established companies will not be included in the law that will be submitted to parliament in a few days.
Instead, the government will continue to hold consultations even as it seeks to pass legislation through the lower house to secure income tax cuts and the standard $1,000 deduction, scrap negative treatment for established properties and replace the 50 per cent CGT discount.
Prime Minister Anthony Albanese said the four changes would be included in a bill to be introduced to parliament on Thursday.
The second tranche of the legislation will address the details of implementation, the official said.
Asked why potential regulation for startups would be added after introduction into legislation rather than being included at the outset, Mr Albanese said this was the “normal” route of tax reform usually applied.
He said if the consultation had started before budget night, some people would have had an unfair advantage.
“That’s called insider information, and because the changes (caused by capital gains and adverse effects) are out of date from budget night, so you don’t get to have the level of consultation that you want to see people come forward with common sense,” he told reporters on Monday.
Earlier on Monday, Housing Minister Clare O’Neil said the government was “starting discussions with startups even before the budget”.
The proposed changes have been widely criticized by the industry, as startups often have a negligible initial cost base and founders rely on large capital raises when selling their businesses to justify the risk they take on in the startup.
Entrepreneurs argue this could effectively double capital gains tax rates and scare away overseas talent and capital.
“It is of course recognized that CGT regulations need to take into account the very different economic aspects for start-ups of how they start their businesses,” Ms O’Neil told reporters in Canberra.
“So we will continue these conversations when they occur in good faith.”
Ms O’Neil ignored a billboard campaign at Canberra airport urging MPs flying to the nation’s capital to “stop the ambition tax”.
He said most Australians were not concerned about the impact of tax changes on their investment property or family trust arrangements.
“They’re sitting around the kitchen table with a pile of bills, trying to think about how they’re going to make ends meet and save money for a deposit on a house,” he said.
“Our budget is for these Australians.”
Mr Albanese tended to narrowly target CGT distinctions at tech startups, The Australian newspaper reported.
But Mr Albanese said Treasury was advising small businesses beyond the tech sector, including the Council of Small Business Organizations of Australia and the Australian Chamber of Commerce and Industry.
David Alexander, the chamber’s head of policy and advocacy, said the damage from the CGT changes would extend beyond startups and the tech sector.
“This will cover all industries – small, medium and large businesses – so healing the damage in a sub-sector really isn’t going to cut it,” he told ABC Radio.
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