Industrial policy for Australian startups
Recent policy moves suggest the Australian government may squander a golden opportunity.
Starting with the proposal to tax unrealised capital gains inside superannuation above a $3 million balance (Division 296), which is a direct threat to angel activity. Self‑managed super funds are a vital source of patient capital for small growth companies and that taxing unrealised gains would force trustees to de‑risk by shifting capital from unlisted, higher‑growth companies into liquid assets like property or listed shares; paying tax on paper gains could require investors to sell holdings early, creating a success penalty and structurally shallowing the pool of angel capital.
Moving onto the equally damaging “sophisticated investor” wealth test. At present, Australians must earn $250,000 per year for two years or hold $2.5 million in net assets to invest in many early‑stage opportunities. This is already an extremely high bar, and the current government is considering raising it to $450,000 and $4.5 million, locking out even more potential angels.
Talent dynamism is also under threat. Victoria is moving to legislate a right to work from home two days a week, while federally the Right to Disconnect gives employees the legal right to ignore work communications outside ordinary hours. These reforms may make sense for large employers, but founders have told me that they are already concentrating more hiring in the US, where the cost of a hiring mistake is far lower, under the expectation of further employee protection regulations.
Is Australia destined to become a training ground for world-class founders and engineers, only to see them move to the US as their careers take off? This is not our destiny, but we need smarter, industry-friendly policy to build an alternative path, where startups start, thrive, and therefore stay in Australia. Let’s be the beneficiary of brain drain, not the victim.
This is why I jumped at the opportunity to contribute to Inflection Points. Inflection Points exists as a publication to disrupt Australian policy parochialism, recommending pro-growth reforms, aiming to improve Australian policymaking.
In my piece, Industrial Policy for Tech Workers, I outline the problems and potential solutions to the regulatory problems faced by the Australian startup ecosystem. I cover a lot more than my complaints above.
Please do give it a read, and let me know what you think.
My thanks to the team at Inflection Points for their help putting this together, and inviting me to share my perspective.