By David Rogers
Wilson Asset Management says the Federal Government’s proposed capital gains tax concession for innovative start-ups is an admission that its broader CGT reforms are broken – and urges Treasury to scrap them altogether.
In a submission to Treasury, the Sydney-based fund manager argues the proposed Innovative Business CGT Concession is welcome in intent but cannot repair the damage caused by replacing the existing 50 per cent CGT discount with indexation and a 30 per cent minimum tax.
“The Government is trying to create a narrow carve-out for start-ups because it knows its broader capital gains tax changes will hurt start-up investment,” says chairman and chief investment officer Geoff Wilson AO. “That is not tax reform. That is an admission the reform is flawed.”
Wilson says the proposed concession is too narrow, too complex and too uncertain.
To qualify, investors must meet multiple conditions – including a five-year holding period, a discretionary innovation test, and a $10m lifetime cap. The concession also applies only to unlisted, independent companies, excluding growth businesses that list on the ASX.
“A start-up should not be punished for succeeding,” Wilson says. “Capital has no patience for complexity. It moves to where the conditions are stable and attractive.”
Wilson’s primary recommendation is straightforward: retain the 50 per cent CGT discount for productive Australian assets. Housing-related reforms, he says, should be handled separately.
“Australia will not build higher productivity by taxing productive investment more heavily,” he says.
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