Labor MPs expect eventual concessions for startups after backlash to CGT changes

Labor MPs expect the government will agree to capital gains tax concessions for startup businesses after a meme-fuelled backlash to the budget, with some wary that scare campaigns could “get out of hand” without clearer explanation of the changes from Anthony Albanese and Jim Chalmers. Guardian Australia spoke to a number of Labor MPs nationwide. Speaking on condition of anonymity, several MPs said they were keen to see change on CGT, with some engaging directly with Chalmers’ office. “If an unintended consequence has caused a headache, let’s fix it,” one Labor MP said about the CGT changes, which have dominated media headlines all week. But several Labor MPs say they believe the government will eventually decide on some kind of concessional treatment for startups, in recognition of the unique settings of such businesses and concerns about how the new cost-base inflation model would affect them in ways that other businesses would not. Others said that while they were confident the negative gearing and CGT changes were ultimately good and important changes, the government needed to do a better job of explaining and “selling” the reforms. Another Labor politician worried the government had failed to effectively explain the complex tax changes, lamenting: “I feel like we don’t necessarily have a clear strategy on complicated issues.” The CGT changes – replacing the 50% tax discount on profits with “cost-base indexation”, meaning tax on profits after inflation, and a minimum 30% tax rate – have been strongly opposed by some tech founders and small business owners, with a social media campaign mocking Albanese in AI-generated memes. Early-stage startups with little cashflow often offer employees equity in the company, or stock options, in lieu of higher pay, while founders can be motivated to take risks with new ventures by a large potential payday when they sell their companies. Both could be affected by the CGT changes, the Tech Council of Australia has warned. The industry minister, Tim Ayres, hinted some concessions could be coming for startups, telling Sky News on Thursday that the government wanted to “make sure these changes land in the right way” that “supports the dynamism” of that sector. “They [startups] are in a different situation. We’re working carefully with that community, with the tech sector, because that’s what’s in the national interest,” Ayres said. “There’s some implementation questions and I know, from my own discussions with that sector, there’s plenty of room for a good discussion there.” Privately, senior government sources have been reluctant to indicate that CGT concessions are a possibility, or even put a timeline on the consultation process. One Labor MP called the business backlash an “unintended consequence”, saying they hoped the government was at least considering making changes. Another MP said they were confident the consultation would lead to some kind of concession model for startups. Two further Labor MPs said they were concerned the government was not adequately communicating the complex changes, and needed to push back against growing misinformation online. One MP warned that the tax reform issue “could get out of hand like it did last time, on negative gearing”, referring to Bill Shorten’s two election losses, and that the government needed to make sure it was “concise”. The Labor MP Jerome Laxale said there were “tough decisions” in the budget, but that the government shouldn’t be deterred by criticism from some quarters. “Progressive change is always difficult to achieve,” he said.“These are tough decisions, but the right ones for the right reasons.”