Capital gains tax carve-outs for startups won’t be included in legislation set to be introduced to parliament within days.
Instead, the government will continue consultation even as it looks to pass laws through the lower house to enshrine income tax cuts and a standard $1000 deduction, abolish negative gearing for established properties and replace the 50 per cent CGT discount.
The four changes will be included in one bill to be introduced to parliament on Thursday, Prime Minister Anthony Albanese said.
A second tranche of legislation will address the details of implementation, he said.
Asked why a potential carve-out for startups would be tacked onto the legislation after it was introduced, rather than included from the outset, Mr Albanese said that was the “normal way” tax reform was usually implemented.
If consultation had started before budget night, some people would have had an unfair advantage, he said.
“That’s called insider knowledge, and because changes are dated – in capital gains and from negative gearing – from budget night, that is why you can’t have the level of consultation that you want to see people coming forward in a common sense way,” he told reporters on Monday.
Earlier on Monday, Housing Minister Clare O’Neil said the government had been “engaging in conversations with startups even before the budget”.
Because startups often have a negligible initial cost base and founders rely on large capital uplift when they sell their business to justify the risk they take on at the outset, the proposed changes have been widely criticised by the sector.
Entrepreneurs argue it could effectively double their capital gains tax rate and scare talent and capital offshore.
“There’s recognition of course that CGT arrangements need to take account of the specifics that are quite different for start-ups in terms of the economics of how they begin their businesses,” Ms O’Neil told reporters in Canberra.
“So we’ll continue those conversations when they’re occurring in good faith.”
Ms O’Neil brushed off a billboard campaign at Canberra airport urging MPs flying into the nation’s capital to “stop the ambition tax”.
Most Australians were not worrying about the impact the tax changes would have on their investment property or family trust arrangements, she said.
“They are sitting around the kitchen table with a pile of bills, trying to think about how they’re going to make ends meet and how they’re going to save for a deposit for a home,” she said.
“Our budget is for those Australians.”
Mr Albanese was leaning towards narrowly targeting CGT carve-outs at tech startups, according to reporting in The Australian.
But Mr Albanese said Treasury had been consulting with small businesses beyond the tech sector, including the Council of Small Business Organisations Australia and the Australian Chamber of Commerce and Industry.
Damage from the CGT changes would extend beyond startups and the tech sector, the chamber’s chief of policy and advocacy David Alexander said.
“This is going to go into all industries – small, medium, and large businesses – so ameliorating the damage in one sub-sector is really not going to cut it,” he told ABC Radio.
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