One Tax Blanket for All of Australia's Problem Children
I’ve been in Australia for almost 20 years now, and for most of that time, I’ve happily accepted our high-tax system. It always felt like a genuinely fair social contract: we pay tax, and in return, society is looked after through world-class healthcare, solid infrastructure, and a robust safety net. Everything is relative, of course.
But over the years, it feels like that balance has broken.
The Collateral Damage of Cooling the Market
Having co-founded a consulting business from scratch and taking it through to an exit, and now building my second business, I see the friction first-hand.
Right now, politicians are desperately trying to fix housing affordability. But by proposing wholesale Capital Gains Tax (CGT) changes, they are catching business builders in the crossfire. Using blunt tax instruments to penalize entrepreneurship just to cool a property market that is arguably already too far gone is incredibly short-sighted.
The government tends to hide behind the RBA. We leave managing the economy to a central bank that is fundamentally a one-trick pony, forced to endlessly hammer mortgage holders with interest rate hikes because it’s the only lever they legally have.
This fumbling of fiscal policy begs a massive question: why do we rely so heavily on crushing individual income and entrepreneurial risk to fund public spending in the first place?
Not Every Start-up is a VC-Backed Unicorn
Whenever I discuss this, a very fair counter-argument comes up: Doesn't the Australian tech scene already get heavily subsidized, especially with Venture Capital tax perks?
In fact, the latest budget just expanded the tax-free thresholds for VC funds. But I feel like there is a crucial piece of nuance missing in this debate.
Not every business is a VC-backed tech unicorn. My previous business was self-funded, and my new business is entirely self-funded too. For founders in this "missing middle" - the ones who don't rely on zero-tax VC schemes - the risk is entirely personal. The capital deployed comes out of our own pockets, and the exit upside is the primary reward for years of building.
You will sometimes hear people point out that the ATO has Small Business CGT Concessions to protect founders. And while those do exist, they are incredibly complex, difficult to scale with, and largely designed for traditional business owners looking to sell up and retire.
But serial founders don't want to retire. We want to take our chips off the table and recycle that capital back into the ecosystem, funding the next generation of founders coming through. The new 30% CGT floor shaves down that pay-out, directly limiting our ability to do that.
The "Sophisticated" Double Standard
To make matters more frustrating, the everyday Australian is locked out of the upside anyway. Who actually gets to access these expanded, zero-tax VC funds? Almost exclusively "Sophisticated Investors" - a completely outdated regulatory moat.
I completely agree that private markets are illiquid and highly risky, and we shouldn't let people bet their life savings on a single seed-stage start-up. But our current system is intellectually inconsistent. We allow an everyday earner to take on a massive, highly leveraged $1.5 million mortgage for an apartment. They can walk into any local pub and dump their pay-check into the pokies. They can even open an app and day-trade highly speculative penny stocks.
But tell them they aren't "sophisticated" enough to put $5,000 into a diversified, professionally managed local VC fund to back Australian innovation? That is purely paternalistic. The "Sophisticated Investor" test isn't a measure of financial literacy; it's just a measure of housing wealth.
If we want to fix productivity, we need to lower the barriers to private markets and let everyday adults invest in our future. A smarter regulatory approach would be to cap retail allocations - say, allowing people to invest up to 5% of their portfolio in private markets - rather than hoarding tax perks for the top end of town and locking everyone else out.
The Trillion-Dollar Missed Opportunity
Now, I am not anti-tax. I am entirely in favour of the moves to restrict negative gearing. I own a property (co-owned with my good 'friend' CommBank), and if removing these tax handouts cools the market and drops my property’s value so someone else can afford to enter, I am completely happy with that. Housing should be a utility, not a speculative tax haven.
But my core frustration remains. Australia is one of the most resource-rich nations on earth. Why are we squeezing small business builders while doing practically nothing to capture the mineral and gas wealth being pulled out of the ground by multinationals?
Like Norway does with it's sovereign fund - Norway taxes their resource sector heavily and funnels it into a sovereign wealth fund that is now worth over $3 trillion AUD - translating to roughly $390,000 for every single Norwegian citizen.
The counter-argument here is that we’re comparing apples to dirt. Norway pumps high-margin offshore oil, while Australia digs up iron ore and lithium in the middle of nowhere, requiring massive private infrastructure. Critics will also rightly point out that we do tax mining through state royalties and corporate tax.
But honestly, the specific commodity is a distraction from the core economic principle. Even factoring in those royalties, a disproportionate amount of the wealth generated by our resources leaves the country via multinational profits. We are aggressively taxing individual productivity while lightly taxing finite national assets.
If we established a genuine Sovereign Wealth Fund, the government wouldn't have to lean so aggressively on taxing individual productivity and business creation. We need a system that rewards building businesses, creating jobs, and sharing our national wealth.
In any budget, some win and some lose. Fiscal policy measures come and go, and we'll just have to wait and see if these changes actually achieve their primary objective of making housing more affordable. If they do, then the friction is probably worthwhile.