Labor's budget was the right call on housing. But for startups, changes to capital gains tax were a wrong turn. I know because, before becoming a vice-chancellor, I was a business founder and entrepreneur. My firm, Seeing Machines, pioneered computer vision technologies. It is now a leader in its field and listed on the London Stock Exchange. Like most success stories, the early days were tough. Anyone who has started a small business has endured the long hours, low resources, meagre income, and the many challenges that come with commercialising an idea.
In the fledgling phase of a new venture, investors are not easy to find. The potential returns are high, but so is the risk. Accordingly, without a mitigating mechanism, typically a concession from government, early-stage venture capital will take its money elsewhere, for example, to the US or Canada where tax exemptions remain for backing startups. By replacing the flat 50 per cent capital gains tax discount with an inflation-adjusted indexation method, this budget takes away the incentive to risk investing in unproven businesses. Worse, it heightens the risk to investors should a venture fail.
