A Perth artificial intelligence founder has become the latest voice in Western Australia‘s technology sector to publicly reject Canberra’s proposed changes to how capital gains are taxed, warning the plan risks punishing the very founders and investors the country says it wants to keep.
The criticism, reported by The West Australian, lands as the federal government continues to defend a suite of tax measures that would reshape the returns on start-up equity, property and superannuation. For a young technology scene still finding its feet a long way from the venture capital hubs of Sydney and Melbourne, the stakes feel especially sharp.
The context
Capital gains sit at the heart of how founders and early investors are rewarded. In the standard model, someone who backs or builds a company pays tax only when they sell their shares and actually pocket the proceeds. The current 50 per cent capital gains tax discount, available on assets held for more than a year, is designed to reward that long-term risk-taking, and the technology industry has long argued it is one of the few settings that makes the punishing odds of start-up investing worth the gamble.
Two policy threads have unsettled that calculus. The first is the government’s superannuation reform, known as Division 296, which proposes a higher tax rate on earnings tied to super balances above $3 million and, controversially, would tax paper gains that have not yet been realised. The second is the recurring debate over whether the broader capital gains discount itself should be trimmed to help repair the budget. Founders tend to treat both as part of the same signal: that the reward for building something valuable in Australia is being quietly wound back.
The news
The Perth founder’s intervention adds a regional edge to a debate that has largely been conducted from the east coast. Western Australia’s technology ecosystem is smaller and younger than its interstate counterparts, and it competes for capital not only with Sydney and Melbourne but with Singapore, London and the United States. The argument put forward is a familiar one in start-up circles but carries extra weight from the west: change the tax treatment of gains, and you change where founders choose to base themselves, incorporate their companies and, ultimately, sell them.
The specific concern about taxing unrealised gains is that it forces a bill on wealth that exists only on paper. A founder whose AI company is marked up in a funding round has not sold a single share, yet under a paper-gains model could face a tax liability with no cash to pay it. For an illiquid start-up holding, that can mean selling equity early, taking on debt, or diluting the very ownership stake that keeps a founder motivated. Critics say it is a structural mismatch between how the tax is levied and how start-up wealth actually behaves.
Two views
On one side sit founders, angel investors and the venture capital industry, who argue the changes tax risk rather than reward it. Their case is that Australia already struggles to retain its best technical talent and that any move making local equity less attractive will accelerate the drift of companies and people offshore. Groups such as the Tech Council of Australia and StartupAUS-aligned advocates have consistently warned that the capital gains discount and favourable treatment of employee share schemes are load-bearing pillars of the ecosystem, not loopholes.
On the other side sits the government and a chorus of economists who see the current settings as generous and poorly targeted. Treasury’s position, broadly, is that the capital gains discount disproportionately benefits high-income earners and that the super concessions on very large balances are difficult to justify against competing budget priorities such as health, housing and aged care. The Grattan Institute and others have argued for years that the discount fuels property speculation and costs the budget billions, money they say could be better spent elsewhere. From that vantage point, the reforms are a matter of fairness and fiscal discipline, not an attack on innovation.
Both positions can be true at once, which is what makes the fight so difficult to resolve. The discount is genuinely generous and genuinely skewed toward the wealthy. It is also genuinely one of the levers that makes founding a company in Australia financially rational. The disagreement is really about which of those facts should win.
What it means for Australia
For the national picture, the Perth founder’s complaint is a useful reminder that tax policy written for the east coast lands differently everywhere else. Western Australia has spent years trying to diversify beyond mining and resources, and AI is one of the sectors state governments and universities have pinned diversification hopes on. Local founders already face a smaller pool of domestic capital and longer flights to investors. Add a tax change that makes equity less rewarding, and the marginal decision to build in Perth rather than Austin or Singapore tips further away from home.
There is also a talent dimension. AI engineers and researchers are among the most mobile workers in the country, courted aggressively by overseas firms offering share packages that can now be worth many multiples of an Australian salary. If the after-tax value of local equity falls, the pitch to stay gets harder. That is a national concern, but it bites hardest in cities like Perth that are trying to grow an ecosystem from a standing start rather than defend an established one.
The counter-argument, worth stating plainly, is that no serious analysis suggests a modest change to the capital gains discount would empty out the local industry overnight. Founders build where the customers, talent and lifestyle are, and tax is one input among many. The risk is cumulative rather than sudden: each setting that makes Australia a little less competitive adds to a case for leaving.
What’s next
The Division 296 super changes remain the immediate flashpoint, with the unrealised-gains element the single most contested feature and the part most likely to be amended as the legislation moves through the parliament. The broader capital gains discount is not formally on the chopping block, but it resurfaces in every budget-repair conversation, and the technology sector reads each mention as a warning shot.
For Perth’s founders, the practical task is to make sure the western perspective is heard before the settings are locked in. Industry submissions, state government advocacy and public interventions like this one are how a smaller ecosystem punches above its weight in a Canberra debate. Whether it shifts the outcome is another question, but the sector appears determined not to let the reforms pass without a fight.
Sources: The West Australian.
