The past two weeks have been full of opinions on the CGT changes.
Most investors and founders are decrying the impact on entrepreneurs, who now face the highest tax rates on their proceeds and may leave the country.
A few argue that founders don’t really relocate based on tax savings, so it’s no big deal.
These missives have largely missed the point. There will always be views on tax winners and losers, and there is clearly complexity to be worked out.
The real question is different: where is the underlying strategy on innovation?
Every few months, there’s a hullabaloo about the impact of a government policy on the startup ecosystem. Taxes on unrealised gains. Changes to the acquisitions approval process. Increases to sophisticated investor thresholds.
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Each time, a policy designed to address an issue in one part of the system has potentially drastic impact on startups and VC. We may be the second-biggest industry in the country, but we are an afterthought when it comes to policy.
Remember the Australian Tourism ad “where the bloody hell are you?“ The premise was simple: we’ve got the beaches, the food, the outback, come on down.
As a startup ecosystem, we can say the same thing to our government.
All countries are in a global race. For talent. For capital. For creativity, productivity, security, self-reliance, relevance. If AI is going to disrupt the labour market, we shouldn’t be shipping all our value offshore.
But there’s a pattern in Australia of being blessed with natural resources, selling them for cents in the dollar, and then importing the value-added product back.
No coherent policy
A coherent policy could change that. Most governments around the world have taken a strong stance on attracting the best and brightest. Israel, for all its geopolitical challenges, has had a long-term commitment to entrepreneurship and innovation, and now has more unicorns per capita than any country on earth, built on fund matching, grants, and tax incentives.
Britain is in some ways even more aggressive: significant tax relief, co-investment vehicles, and dedicated founder visas.
Singapore offers a 250% tax deduction for R&D. South Korea, Chile, France, and Germany have all moved in the same direction.
We do have good incentives here. The R&D Tax Incentive is decent. ESVCLP and ESIC are real and meaningful. But even those are constantly reviewed and questioned, and they don’t add up to a strategy.
This isn’t whinging. It’s not already-rich folks wanting to dodge taxes. It’s recognising that private endeavour has built this ecosystem into a genuinely positive position.
We have a rapidly-growing, world-class, highly motivated talent pool. Established, value-additive investors. We are one of the fastest-growing ecosystems on the planet.
The opportunity is growing, and the reward for success is greater than it’s ever been. Conversely, the risk of being left behind has never been higher. It’s on us to make the point to government and other stakeholders why this matters.
As the second-biggest industry in the country, let’s stop fighting spotfire after spotfire and start asking for what we actually need.
3 things we’d like to see:
- A matched co-investment vehicle along the lines of the British Business Bank or Israel’s Yozma. Government capital, alongside private capital, is deployed at the seed and Series A stages, where the funding gap is sharpest.
- A genuine founder and talent visa that competes with the UK’s Innovator Founder or Singapore’s Tech.Pass. Not a token scheme. One that actually moves the needle on attracting the best operators globally.
- Broader, more stable R&D incentives that don’t get re-litigated every budget cycle. Founders can’t plan a five-year roadmap when the rules change every twelve months.
We really do have all the pieces. Wouldn’t it be great to get a bit more help? If you feel the same way, or want to challenge any of these points, get in touch.
- Paul Naphtali is the cofounder and managing partner at Rampersand.
