Entrepreneurial Australians may be lured abroad to New Zealand or the United States after the federal government overhauled the tax treatment for investments, business owners warn.
NZ finance minister Nicola Willis may have been tongue-in-cheek when she recently invited Aussies to hop across the ditch – where there is no comprehensive capital gains tax (CGT) – but business owners may be seriously considering the move.
Founders say scrapping the 50 per cent CGT discount, which will drastically reduce profits for some business owners who decide to sell, is the death knell for Australia's start-up culture.
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"They need to be rewarded for the hard work they put in," he said.
"Even in a place like NZ – sure, it might not have as many people, but I do think that their government is far more supportive from a taxation standpoint."
If there is a mass exodus of deep-pocketed investors and founders to NZ or the US, Australia could miss out on billions of dollars that will instead be pumped off-shore.
The co-founder of Melbourne start-up QSIC, Matthew Elsey, who now lives in the US, agrees that fellow Australian founders will now be rethinking the geography of their next venture.
"This is a sad state of affairs. It is part of the Aussie spirit to have a crack and give it a go. Jim is getting us going all right. Going overseas," he said in a post on LinkedIn.
"If you're optimising for success and you look at this tax treatment, you now need to be way more successful in Australia to achieve the same outcome you could overseas.
"In an industry where most businesses fail, no one will take that risk."