We want to know what issues matter to you ahead of the federal budget. Have your say.<\/p>\n
Whether that change is “grandfathered” or “transitional”, as some reports suggest, also remains unclear.<\/p>\n
But what is certain is that such a change would not just stop <\/strong>some property investors from getting a big tax break when they sell up. It would also increase the amount of tax some <\/strong>shareholders pay if they make a gain when selling shares.<\/p>\n Investors argue it would particularly hurt startups, which rely on employee share schemes to raise funds.<\/p>\n Paul Bassat says if there is tinkering with CGT discount for shares, “founders will leave Australia in big numbers”. (ABC News)<\/p>\n “Founders will leave Australia in big numbers,” Mr Bassat warned in a series of posts on his LinkedIn page.\u00a0<\/p>\n “At a time when we are about to see a tsunami of job shedding by existing businesses, Australia’s best hope is a wave of startup innovation. A ~50% tax on gains by founders and team members will have disastrous consequences.<\/p>\n “This is not about a pampered sector wanting to be treated differently, but a decision about the sort of country and economy we want.”<\/p><\/blockquote>\n This view was echoed by others in the tech sector who spoke to ABC News.\u00a0<\/p>\n Why startups fear ‘unintended consequences’<\/p>\n Startups often struggle to attract talent and conserve cash. One way to do it is to promise big returns if the startup hits Silicon Valley giant status.<\/p>\n For most of the time the startup runs, the company makes a loss. But the promise of a big payday, if the company goes public or is acquired, is what enables many startups to attract talent when they are competing with listed companies that can, initially, often pay far higher salaries.<\/p>\n Should a startup hit the status of Canva or Atlassian, that is the point that the founders and employees could choose to sell their company shares and receive a 50 per cent discount on their marginal tax rate for the capital gains, or profit, they made on their stake.\u00a0<\/p>\n Why the collapse of SVB had a ‘contagion effect’<\/a><\/p>\n The SVB collapse didn’t just leave\u00a0the banking sector in disarray; technology startups are bracing for a harder time, and there are fears the global economy is at risk of recession.<\/p>\n Doing so can be highly lucrative once companies hit multi-million-dollar valuations.<\/p>\n “Employee share ownership is actually a pretty powerful mechanism for retention and loyalty and hard work,” said Alan Jones, a prominent Australian venture capitalist and general partner of M8 Ventures.<\/p>\n He told ABC News that big cash-out events for startup founders and employees “don’t happen very often; they may happen once in 10 years in a startup”.<\/p>\n Alan Jones says employee share schemes drive loyalty and hard work. (Supplied)<\/p>\n But asked whether that can be very lucrative for those that do cash out at the right time, he said: “Yeah, it can be. There are a number of millionaires at Canva, right?”<\/p>\n “But we also have to remember that the failure rate in Australian tech startups, startups worldwide, is very high.”<\/p>\n Mr Jones said he thought changes to the CGT discount would make it harder for startups to attract talent and hurt the local ecosystem.<\/p>\n “Why would I choose to take $200,000 in employee share options in an Australian startup and get taxed at 50 per cent. I can get paid more, pay almost no tax on my share options, just for putting up with a different lifestyle in San Francisco and New York.<\/p>\n “Or when I can go and be a software engineer at CommBank and get very well paid, have lovely conditions \u2026 do I go and join this little five-person team that are trying to disrupt CommBank?\u00a0<\/p>\n “Odds are most of the startups trying to disrupt CommBank will fail, but if one of them succeeds, the people who started that company have an opportunity to make good money from that. They’ve taken a huge risk.”<\/p>\n Negative gearing, CGT and trusts explained<\/a><\/p>\n The government is poised to make changes to negative gearing, the capital gains tax discount and the tax treatment of trusts. So how do they work, and what could changes look like?<\/p>\n The speculated return to indexation for Capital Gains Tax (CGT) would mean that, instead of a blanket 50 per cent discount for assets held longer than one year, the initial value of the investment would be indexed by the Consumer Price Index, meaning that tax would be owed when the asset is sold only on any profit above inflation over the period it had been held.<\/p>\n That so-called “real” profit would then be taxed at the investor’s marginal tax rate, which is currently a maximum of 45 per cent plus the 2 per cent Medicare Levy.<\/p>\n Depending on the inflation rate, the rate of asset price growth, and the length of time the asset is held before being sold, the indexation method can sometimes result in a lower CGT tax bill than the blanket 50 per cent discount.<\/p>\n The indexation system tends to favour longer-term asset owners, while the current discount system is generally more favourable for shorter-term investments.<\/p>\n Will there be a repeat of the 2009 ‘tax on innovation’?<\/p>\n Sally-Ann Williams is the former CEO at tech incubator Cicada Innovations and has worked in the sector for decades. She also fears unintended consequences.<\/p>\n Investors consider selling amid tax break talk<\/a><\/p>\n With negative gearing and capital gains tax back on the national agenda, experts say such reforms would be unlikely to lead to a major fall in property prices.<\/p>\n “We risk repeating the disastrous 2009 Employee Share Option Plan (ESOP) ‘tax on innovation’, which required a six-year struggle to secure a rollback and cost Australia an entire generation of startups,” Ms Williams told ABC News.<\/p>\n![\"A](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2026\/05\/d2ed973877eff7fa963a38e52696bb1e.jpeg\")
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