The Government’s proposed Innovative Business CGT Concession creates a narrow carve-out for “innovative” businesses, leaving out many others who also start and grow businesses and take a real risk - like design firms, consultancy firms, and more.

I’ve proposed a fairer alternative that treats all risk-taking businesses the same and preserves internationally competitive rewards for founders. You can read more about my proposal here.

We only have a few weeks to put the pressure on the Government. You can read my open letter to the Prime Minister below - and if you agree, add your name as a signatory using the form on this page.

Dear Prime Minister and Treasurer

RE: Proposal for an alternative approach to taxing capital gains on business

We write as concerned Australians to urge you to reconsider your approach to the CGT treatment of businesses and business-related assets, and to adopt a simpler, fairer alternative.

We acknowledge the intent behind introducing an Innovative Business CGT Concession (IBCC) alongside indexation of capital gains. However, we believe it will ultimately be too narrow and too complex to be effective, given the consequences for businesses that fall outside it.

Improving productivity depends on Australia remaining a competitive place to start, grow and invest in businesses. That means preserving incentives for risk-taking across all businesses, not only those defined as most innovative by the Department. We are concerned that indexation will make Australia internationally uncompetitive for low-capital, high-growth businesses, but also comparatively reduce risk-taking in active share portfolios because of the asymmetric treatment of losses and gains. While there has been a lot of rhetoric, we assure you we are already seeing the consequences of these changes in our networks of current and aspiring founders, employees and investors.

We do not all agree on the rate of CGT that should apply to businesses. But given the government’s aims to rebalance the tax system, we all agree that the rate of tax on capital should be predictable and internationally competitive. We believe a more suitable compromise would be to retain a flat discount at a reduced rate of 40% applied to all “active assets”, covering a broader range of businesses, shares and options. This would give investors, founders and employees certainty from day one and it would keep Australia’s maximum tax rate on capital gains at 28% after discount, comparable with peers including Canada (~25%) and the United States (~28%).[1] Indexation could be maintained on property assets where a cost base is better established. PBO analysis commissioned by Allegra Spender MP indicates a small, positive budget impact relative to the exposure draft IBCC model, though data limitations mean some buffer is appropriate.[2]

Thank you for your consideration.