Crossbench MP Allegra Spender has joined forces with a coalition of prominent business figures, including several with Labor ties, in a last-minute campaign to force the Albanese government to abandon or significantly rewrite its proposed changes to the capital gains tax discount. The push comes as Treasurer Jim Chalmers faces mounting political pressure over budget reforms he has conceded are causing real pain across the business community.
What is the dispute over capital gains tax?
The government's budget package includes an overhaul of the capital gains discount system. In response to fierce criticism, Chalmers announced a carve-out for innovative firms, shielding companies creating new or "significantly improved" products, such as technology start-ups, from the full impact of the changes.
Spender argues this exemption is far too narrow. She contends that businesses in sectors including marketing, fashion and mining would not qualify and would instead face some of the highest capital gains tax rates in the world, potentially reaching into the forties as a percentage.
"Australia doesn't need to be the lowest taxing country but it can't afford to have the highest capital gains tax in the world," Spender said, warning of real-world consequences for investment and for entrepreneurs considering setting up businesses elsewhere.
She pointed to Israel as a country that uses a similar inflation-adjusted model but caps its rate at 30 per cent, well below what Australian investors could face under the proposed changes.
Spender said she is working to convince Labor to change course, and is also in discussions with the Greens about supporting her alternative proposal in the Senate. Her position is that patching the existing framework with narrow carve-outs creates a system that is "overcomplicated, unfair and a drag on prosperity."
Who is backing Spender's push?
The group supporting Spender's campaign is notable for its breadth and its links to both sides of politics. Signatories include:
- Lachlan Harris, a former adviser to prime minister Kevin Rudd who has since moved into business
- Anna Fitzgerald, co-head of the University of Sydney's Genesis start-up accelerator
- David Burt, UNSW director of entrepreneurship
- Navleen Prasad, head of the Australian Investment Council
- Daniel Petre, co-founder of Airtree Ventures and a recent board member of Labor's National Reconstruction Fund
- Paul Bassatt, co-founder of Seek
- Tim Reed, former Business Council of Australia president and a current member of the government's Climate Change Authority board
Burt described the government's proposed carve-out as "an unhelpful Kafkaesque maze." Fitzgerald warned against letting the tax department decide which companies count as innovative, arguing that tomorrow's successful businesses cannot always be identified from today's government checklists.
Harris, who has previously warned that centre-left governments fail when they neglect prosperity, called the definitional approach "a problem masquerading as a solution" and characterised it as "bad policy, not hard reform."
Chalmers defends the package
The Treasurer has pushed back against claims that the revised model will impose dramatically higher tax burdens, arguing fears are overblown. He told parliament that innovative firms would "still receive a significant discount on a future capital gain" under the new arrangements.
"These reforms give the private sector the tools and the tax concessions to help them succeed in an increasingly competitive world," Chalmers said, adding that the package provided "more certainty for investors and more incentives for innovation" and built on $3.8 billion in new tax relief.
The political backdrop is complicated further by economic pressures, with petrol prices surging due to the conflict in Iran, and the Reserve Bank weighing a fifth interest rate rise of the year ahead of Melbourne Cup Day.
What happens next
Spender's campaign highlights how Labor's budget changes have managed to alienate even voices broadly sympathetic to progressive tax reform. Entrepreneurs and investors who back business-friendly tax settings are warning that narrow innovation definitions, however well-intentioned, risk stifling the kind of broad-based investment Australia needs. For business owners assessing how tax and regulatory shifts might affect the value of their enterprises, understanding how external shocks can affect business stability is increasingly relevant in the current environment.
Whether Labor adjusts its position, or whether Spender can win enough Senate support for her alternative, is expected to become clearer in coming days as the legislation moves through parliament.
