Tax reform is overdue, and EG supports the Government’s intent to address long-standing equity issues in Australian taxation.
But good tax policy is in the details, and some of the proposed budget changes will produce consequences Treasury doesn’t appear to have intended.
Our submissions to the Federal Government addresses two of these issues.
Startup CGT
Startup equity is fundamentally different from passive investment in property or shares. Founders subscribe at nominal cost, ESOP holders accept equity in lieu of wages, and returns are binary — most startups fail entirely. Indexation of a near-zero cost base provides almost no relief, while foreign investors in the same companies generally pay no Australian CGT at all. The proposed “innovative company” carve-outs are too narrow and too limited. If this issue is not adequately addressed, the reforms risk tilting ownership of Australia’s innovation economy offshore.
Discretionary Trusts
The 30% minimum tax was broadly accepted as fair. But denying corporate beneficiaries any credit for trustee-level tax creates double taxation that goes well beyond the stated purpose — and there’s a simpler fix that achieves the same integrity outcome.
We’ve put these suggestions forward in the spirit of forging equitable reform that supports productivity and economic dynamism.