A whole lot of Australia’s enterprise capitalists and founders clearly imagine they’d be higher off shunting
off to New Zealand the place the capital positive factors tax is zero.
After they land they’ll discover the identical excessive home costs pushed up by buyers. However they’ll additionally
discover a know-how business starved of capital in a much less diversified financial system.
I reside in New Zealand, the place I’m the founding father of a workforce administration software program firm.
Earlier than that, I labored as a administration advisor, and previous to that as an financial advisor for the World Financial institution and the Asian Growth Financial institution. My economics diploma from the College of East Anglia has come in useful all through.
With this in thoughts, I’ve been watching with amusement the Capital Gains Tax debate rip by way of
Australia’s startup business within the wake of the Federal Price range. Outstanding media figures and tech
business leaders have constantly shone a light-weight on New Zealand (and Singapore) for having no
CGT in any respect.
Certainly, if Australian enterprise media and LinkedIn are to be believed, this normalisation of CGT will saddle Australia with a generational flight of capital and expertise throughout the Tasman. The Treasurer, the logic goes, should implement a carve-out to forestall this. Additional, it’s argued {that a} low CGT isn’t solely key to attracting startup capital, but in addition to driving GDP progress and employment by way of a thriving startup ecosystem.
Capital and the good migration fable
Let’s begin with capital. In 2024, NZ startups attracted NZ$467 million, or about NZ$87.32 (AUD$71.38) per capita. In 2025, Australian startups attracted $5.1 billion (SmartCompany, February), or about AUD$182.14 per capita — greater than double.
Because the headline from an opinion piece inThe Submit by Kiwibank’s chief enterprise banking government Elliot Smith famous simply six months in the past: ‘NZ could double its startup count – if only startups could access enough capital’.
A lot for being a tax haven.
What about progress and jobs? According to the Tech Council of Australia, the Australian tech business presently accounts for 8.9 per cent of GDP. In New Zealand, it’s 8.0 per cent.
The Tech Council additionally claims a million know-how business jobs within the Australian financial system, which is about 6.7 per cent of the whole workforce. In New Zealand the quantity is 119,000, or about 4.8 per cent of complete jobs.
Tax, property, and the place cash really goes
In the meantime, New Zealand has a property market that’s arguably been extra bonkers than Australia’s:
Auckland’s home price-to-income ratio peaked at round 13 in 2022. It has solely come down as a result of the financial system has contracted, whereas unemployment hasn’t ticked up too badly.
This has given the New Zealand central financial institution room to chop charges exhausting (the money charge is presently 2.25 per cent). Auckland has additionally carried out some pretty heroic housing provide measures that at the moment are bearing fruit.
Once we take a step again, New Zealand’s family to revenue ratio sits round 7.9, in opposition to Australia that’s a tick above eight.
VCs and founders in Australia would possibly counter that New Zealand’s downside isn’t that it doesn’t tax startup capital positive factors, it’s that it doesn’t tax property both.
They’ve a degree. New Zealand doesn’t tax funding properties held for greater than two years. It’s referred to as the Brilliant-Line Property Rule (Australian VCs and founders who comply with by way of on their menace will wish to get their heads round it). This was to forestall flipping. The Ardern authorities tried to roll again funding property incentives, the Nationwide authorities has wound them again.
Does that imply I’m bearish about Australian startup business funding? By no means. Taxation is about steadiness, and its mixture of eradicating adverse gearing concurrently eradicating CGT that’s essential.
For years, we’ve heard from throughout the ditch that, like in New Zealand, Ausralian buyers are too conservative — too centered on property, and in a pinch, prepared to take a punt on mining.
Maybe distance provides us some perspective over right here. However maybe VCs and startup founders have to be reminded that they’re not the one ones complaining about tax reform. The property buyers are complaining too.
Eradicating adverse gearing and CGT concessions on property funding will cut back the cost-benefit calculation for property buyers. They’re going to need to park their cash elsewhere.
Sure some pissy VCs and founders would possibly pull up stumps and ship throughout to New Zealand. However the majority will keep, and the good ones will search for this subsequent technology of buyers
