Entrepreneur says the rich should stop complaining about tax changes

Rachael Wilde runs a multi-million-dollar beauty brand. (ABC News: Thorsten Joses) Link copiedShareShare articleThe federal government didn't really see it coming. It had expected a political fight in relation to its budget announcement to axe the 50 per cent capital gains tax discount in favour of a "cost-based indexation" model. But it hadn't expected a meme-fuelled backlash would come so strongly from the little guys — savvy young founders of small businesses and start-ups who took their messages of discontent to their millions of followers on social media. "What changing capital gains tax around small businesses has to do with making housing more affordable for young Australians was a confusing puzzle piece to try and put together," says Rachael Wilde, co-founder of York St Brands. Ms Wilde is one of the entrepreneurs who took to social media to share her frustration when the budget changes were announced. She started a skincare business six years ago, with the backing of investors who were willing to take a punt on her. She's now running a multi-million-dollar beauty brand. "The start-ups of today become the employers of tomorrow," Ms Wilde says. Ms Wilde told the ABC she feared changes to the capital gains tax could mean lower returns for investors, and with fewer rewards, there could be reduced funding for start-ups. "It is very rare that businesses get started with giant funding rounds from venture capital and private equity," she says. Answers to all your questions about the federal budget's changes to negative gearing and the capital gains tax. "A lot of the time, we're relying on personal investors. But if you materially reduce the upside, and you don't at all reduce the risk, then you are kind of left asking the question: 'Why would these investors now come in and back such high-risk assets?' "It's also left the question: 'Why are people going to take this leap in the first place?' Again, if the upside's been materially reduced, but the risk remains the same, I do think it will make young founders hesitant." There is speculation that now, in response to the onslaught from Ms Wilde and many other well-known entrepreneurs and venture capital investors, Treasurer Jim Chalmers may announce some kind of concessional treatment for start-ups. Over the past week, many in the tech sector have continued lobbying the government for an exemption, arguing start-ups shouldn't be the ones who become unintended victims of an attempt by the federal government to solve Australia's housing crisis. Rachael Wilde says start-ups rely on personal investors. (ABC News: Thorsten Joses) Under the government's proposed budget changes, the 50 per cent capital gains tax discount will be replaced with cost-based indexation from July 1, 2027 for assets held for more than 12 months, with earlier gains remaining under the current rules. One start-up founder who helped spread viral memes about capital gains tax reforms says the campaign was aimed at attracting attention after the budget, and not necessarily focused on accuracy. Instead of effectively halving a taxable capital gain, the purchase price will be adjusted for inflation, and tax will apply to the remaining "real" gain. The government says there will also be a 30 per cent minimum tax on real capital gains. It is unclear how a carve-out for start-ups will look. The government says it is still consulting on the changes, and earlier this week was at pains to point out that most small businesses would not be impacted. Kate Cornick says Australia needs to ensure risk is rewarded. (Supplied: LaunchVic) Tech Council chief executive Kate Cornick has been meeting with the federal government about the issue. Dr Cornick told ABC's Insiders On Background podcast: "Successful founders will see their tax rate increase significantly, and that is a disincentive to operating and starting and growing a start-up in this country, so we absolutely need to make sure that we are rewarding that risk." Industry Minister Tim Ayres was asked by Sky News on Thursday about whether start-ups would be carved out of the new rules. He did not explicitly rule out future changes or carve-outs, instead saying the treasurer was consulting with the start-up community. Tim Ayres says the government is continuing to consult with the tech sector on the proposed CGT changes. (ABC News: Matt Roberts) A spokesman for the treasurer did not detail whether there would be a change to its proposed CGT legislation, but told ABC News, certain "existing small business CGT carve-outs and concessions are not changing". "The most recent tax data shows nine in 10 small businesses are eligible for CGT concessions, meaning they can pay reduced or zero CGT when they sell their business," he says. Peter Dunne says generational inequity needs to be tackled, but small businesses should be protected. (ABC News: Billy Copper) But entrepreneur Peter Dunne, who in 2015 helped the then government write law

Entrepreneur says the rich should stop complaining about tax changes

Key takeaways

More in international