Labor to Consult Tech Sector Amid ‘Meme’ Backlash

The tech sector has expressed concerns about the impact of the government’s capital gains tax changes on start-ups.

Australian Finance and Women Minister Katy Gallagher holds a press conference at Parliament House in Canberra, Australia, on May 9, 2023. Martin Ollman/Getty Images

The Albanese government will consult the tech and start-up sector on capital gains tax (CGT) changes amid an online backlash.

This comes after AI-generated memes targeting Anthony Albanese circulated widely online, including images portraying him as a silent business partner sharing in the earnings of local companies.

The federal budget delivered on May 12 abolished the 50 percent CGT discount, replacing it with cost base indexation from July 1, 2027, and introducing a 30 percent minimum tax rate on gains.

Many business owners have expressed concerns that they could be subject to tax rates of up to 47 percent when they sell their businesses.

The Tech Council of Australia, a peak industry body, said it was concerned about the impact of the CGT changes on the sector, saying CGT was “a vital lever for the tech sector in rewarding risk-taking by employees, founders and investors.”

On May 20, Finance Minister Katy Gallagher said the government would talk with the tech companies and start-ups to understand more about some “unique features of their industry.”

“And I think that is a responsible thing to do, the treasurer had some of those discussions earlier but those can proceed now with the arrangements we’ve outlined in the budget,” she told the Australian Broadcasting Corporation.

However, Gallagher noted that the government had not taken a position on any potential carve-outs for the sector.

“What we’ve said is we want to work with that sector to understand a little bit more about the concerns they are raising, and it is particularly about some of the costs,” she said.

The minister pointed to issues around how early-stage businesses are structured and noted Treasurer Jim Chalmers would lead further talks.

“We want to work through that with them further and the treasurer has undertaken to do that, and it is clear in the budget papers,” she said.

Prime Minister Downplays the Backlash

Meanwhile, Albanese has downplayed the online backlash and thanked business owners for sharing their “nice” photos.

“I think some of them are very flattering and I thank them for picking very nice photos of me,” he told reporters.

Regarding the CGT changes, the prime minister said what the government was doing was returning the system to what was there before 1999.

“When those changes were introduced, what we’ve seen since then is a massive distortion of investment as towards housing away from other forms of investment because of the changes that were made,” he said.

“What we’re doing is simply moving to a real gains system. So it only impacts when gains are made, capital gains. That’s not when the normal course of business occurs.”

“When the capital gains occurs, it’s looked at the real gains, that is the gains less inflation as we go forward. And that’s a system that operated effectively between 1985 to 1999.”

Opposition Opposes Tax Reforms

The Opposition has vowed to oppose Labor’s negative gearing and CGT changes in parliament and repeal them if elected at the next election.

During his speech at the National Press Club on May 20, Shadow Treasurer Tim Wilson said the Labor government had “declared war on the self-starters and small businesses of this nation” with its tax policies.

He also warned that young Australians who invest in shares, ETFs (exchange trade fund) and crypto for their first home deposit will be affected by the CGT changes.