Australian businesses will be “punished for succeeding” as Labor’s tax changes fail to carve out prosperous companies, top fund manager Geoff Wilson has warned.
Treasurer Jim Chalmers will still allow early stage investors, founders and employee share scheme participants to access the 50 per cent capital gains tax discount.
He will also extend the discount to companies with less than $10 million in annual turnover while other companies will be subject to the new inflation adjusted model which implements a minimum 30 per cent rate.
Mr Wilson, an outspoken critic of the change, said restricting the carve-out to these small companies and enterprises was anti-growth and anti-aspirational.
“The government says it wants to support innovative Australian businesses, but its proposed concession excludes many businesses once they do exactly what public policy should encourage: list on the ASX, raise growth capital, employ more Australians and give everyday investors the opportunity to participate,” he said.
“A start-up should not be punished for succeeding. A company should not lose support because it grows, lists or raises capital in Australia’s public markets.
“Every great Australian company started small. If policy makes it harder for those companies to attract capital as they grow, Australia will have fewer future leaders, fewer jobs and weaker productivity.”
The carve-outs have been widely criticised by business bodies and groups for acting as “damage control” for Labor’s controversial CGT overhaul.
The Australian Chamber of Commerce and Industry CEO Andrew McKellar said the carve-outs fail to address the broader negative impact of Labor’s tax changes.
“The federal government is trying to ameliorate the damage of these CGT changes, but that is all it does,” he said.
“The bill still imposes a significant new tax burden, penalising investment in a wide range of businesses.”
Former Queensland Labor premier Peter Beattie broke rank with the party and argued the changes would send capital overseas.
“Some of the changes that are proposed don’t work,” Mr Beattie told Sky News.
“(They) do not work for research and it’ll see people go overseas, it’ll see a brain drain (and) it’ll see capital leave.”
Mr Wilson has argued the CGT change should not apply to any productive assets.
He stressed the carve-outs confirmed the “central flaw” in the tax reforms and would hurt Australia’s dire productivity rate.
“That is not tax reform. That is an admission the reform is flawed,” Mr Wilson said.
“You cannot fix a structural problem with a narrow, conditional and capped concession.”
Labor’s tax changes are seen as a threat to the nation’s already low productivity rate – which fell 0.6 per cent in the March quarter.
Productivity measures Australia’s GDP against the number of hours worked and is seen as crucial to tackling the rise of inflation while Australia’s GDP recovers from its post-pandemic slump.
Mr Wilson said the nation’s productivity growth will take a hit if investment is taxed at a higher rate.
“It will not build more innovative businesses by making early-stage capital more uncertain,” he said.
“And it will not build more Australian success stories by telling investors that only some businesses, at some stages, under some conditions, deserve support.
“The right answer is not a narrow concession. The right answer is to retain the 50 per cent CGT discount for productive Australian assets and stop making it harder for Australian businesses to attract the capital they need to grow.”