Startup Leaders Warn CGT Reforms Will Drive Capital Overseas
Forty-five young Australian tech founders unite against Labor's capital gains tax overhaul, warning the reforms will punish entrepreneurial risk-taking and push capital, talent and ideas to more competitive jurisdictions.
Forty-five young Australian tech founders have signed an open letter to Prime Minister Anthony Albanese with a blunt assessment of Labor's capital gains tax overhaul: "We work the hours. We carry the risk."
The message arrives as a formal warning that the reforms will punish entrepreneurial risk-taking and push investment to more competitive jurisdictions.
The coordinated pushback frames a generational clash between Canberra's lawmakers and a new breed of builders who view the tax changes as government overreach into Australia's startup ecosystem. Signers include Linktree co-founder Alex Zaccaria, me&u CEO Kim Teo, Kinso AI's Frank Greeff, and Everlab co-founders Georgia Vidler and Marc Hermann. All 45 are under 40.
The reforms eliminate the 50 percent capital gains tax discount for assets held more than 12 months. A cost-base indexation model replaces it from July 1, 2027. A new 30 percent minimum tax rate will apply to all capital gains accruing after that date. Treasury analysis shows the average tax rate on capital gains would increase from 19.3 percent to 21.5 percent.
Startups absorb the harshest impact. Their shares typically carry a zero or nominal cost base, so indexation delivers negligible relief compared to the 50 percent discount on the full gain. Employee share schemes, which startups use to attract talent in place of higher salaries, lose the discount benefit entirely.
"You are taxing the journey, not just the destination," said Steve Baxter, founder and CEO of Beaten Zone Venture Partners.
Angel investors and early-stage venture capitalists operate on portfolio logic. One big win offsets several failures. The tax changes reduce after-tax upside and threaten investment appetite.
Treasurer Jim Chalmers pledged support in Question Time, stating, "We think you are a really important part of the economy, in lots of ways the hope of the side when it comes to dynamism and productivity, and we will reflect and recognise that in our policy."
Draft legislation for the CGT and negative gearing changes is planned for early June. No firm timeline for consultation exists.
"As an industry, we don't feel like we were consulted or given any opportunity to give feedback on the consequences of these changes to innovation in Australia," said Kim Teo, me&u co-founder and CEO. "These measures have felt rushed and not thought through."
Australia faces immediate competition from jurisdictions with no capital gains tax. Singapore attracted US$8.2 billion in startup capital in 2024 versus Australia's US$5.4 billion. New Zealand imposes no CGT on shares. Rehan D'Almeida, CEO of FinTech Australia, warned of a "real risk these changes push capital, talent and ideas offshore" into regions with looser tax programs.
The concern plays out in real time. "In the past 12 hours alone, I have had my team asking about relocating overseas because they see these settings as making Australia less competitive for people who want to build ambitious global companies," said Dr. Thomas Kelly, CEO and co-founder of Heidi Health.
The opposition has gone viral through social media campaigns. Kinso AI co-founder Frank Greeff originated AI-generated memes depicting Albanese as a "47 percent business partner"—a figure representing the worst-case scenario of 45 percent marginal tax plus 2 percent Medicare levy. Greeff admitted the 47 percent figure represents the extreme case but defended the bold approach.
"Unfortunately the more nuance you have the quicker someone will just scroll past and not care about what you're saying," Greeff said. "This 'consultation period' would have just happened, and so I had a choice: do something that is bold, that will catch fire on the internet, and that gets enough attention to create a conversation."
Shadow Treasurer Tim Wilson will use a National Press Club speech to accuse Labor of declaring "war on the self-starters and small businesses of this nation." The opposition promises to repeal the CGT and negative gearing changes if elected.
Productivity Commission chair Danielle Wood warned the reform risks "unintended consequences" for the startup sector. Analysts project domestic venture investment could contract between 15 percent and 20 percent over the next two fiscal cycles if no startup protections are introduced.
Small Business Minister Anne Aly asserted about 90 percent of small businesses would experience "absolutely no impact" from the changes. Assistant Minister for Digital Economy Andrew Charlton dismissed the 47 percent meme as false, stating, "It is absolutely not true to say that we are somehow increasing tax to 47% on entrepreneurs or small businesses."
The stakes center on Australia's position as an innovation hub in a fiercely competitive global market. With jurisdictions like Singapore offering zero capital gains tax, the reforms risk accelerating capital flight and talent migration at the precise moment when young Australian builders demand freedom to create rather than government redistribution of their success.