Australian tech founders mock PM with AI posts over tax backlash

Australia's startup sector faces a critical crossroads as the government's planned capital gains tax (CGT) overhaul threatens to undermine the equity-based incentives that fuel early-stage innovation.

The new policies will see the 50% CGT discount replaced by cost-base indexation, where capital gains will be taxed only on gains exceeding the inflation rate, along with a minimum tax rate of 30%.

Entrepreneurial startup founders have raised the concern of 'founder flight', whereby entrepreneurs migrate to countries with more favourable taxation policies such as Singapore and the United Arab Emirates.

Boost Juice cofounder Janine Allis has raised concerns regarding the reduction of the CGT discount. Tim Wilson, the opposition's shadow treasurer, explicitly raised concerns about founder emigration.

Many tech entrepreneurs have openly mocked the policy by posting AI-generated photos of Prime Minister Anthony Albanese on their office premises.

Early-stage companies that struggle for cash flow generally pay their employees with shares instead of offering good salaries.

Kinso communication app founder Jacques Greeff said that the removal of CGT benefits would mean “that all the normal risks still apply, but there’s less reward", which would make it hard to recruit talent.

"Australia should be encouraging young founders to build the next Canva," Greeff said. "My fear is they don't even attempt it now or, worse, they go overseas and build the next unicorn and Australia misses out entirely."

While the criticisms have been intense, both Prime Minister Albanese and Treasurer Jim Chalmers highlighted a willingness to consider carve-outs for startups. While Albanese referred to research and development tax incentive and immediate asset write-off measures that were part of the budget, Jim Chalmers noted that "startups might have a different cost base from other businesses."

The Tech Council of Australia welcomed "new innovation incentives and venture capital reforms", while negotiations continue over CGT treatment.

As stated by the economist Saul Eslake, businesses formed anew could be eligible for more favourable tax treatment since they do not have any cost base from which they can index their taxes. But the economist Chris Richardson was cautious about "bending" when it comes to CGT changes because he believes other measures would be better.