Technology alliance seeks moves on CGT

Leading Australian technology associations have banded together to pressure the Federal Government to lower the Capital Gains Tax in order to bring the rate in line with other nations.

The Technology Tax Alliance is urging the government to bite the bullet on CGT and go for an effective rate of 20 per cent or less.

This is, the alliance argues, essential to make a real difference in the availability of venture capital for emerging high tech firms.

The alliance comprises the Australian Information Industry Association, the Australian Telecommunications Industry Association, the Australian Electrical and Electronic Manufacturers Association, the Australian Interactive Multimedia Industry Association, the Internet Industry Association and the Asia Pacific Smart Card Forum.

It believes the CGT rate must offer real incentives to longer term investments, via substantial rate cuts.

Alliance spokesman, Rob Durie said: “If we look to the UK and the US, favourable treatment for long-term investment has facilitated the development of a vigorous venture capital industry which has in turn financed a huge number of entrepreneurial companies”.

“The effective rate on a ten year investment in the UK is as low as 10 per cent due to their stepped rate system. In the US a similar investment would attract a rate of 18 per cent. Australia must follow suit – only a CGT rate of 20 per cent or less is acceptable.”

The alliance is also pushing other CGT reforms it believes are essential to stimulate the economy, including the provision of rollover relief for company restructuring where capital gains are not realised.

Mr Durie believes current disincentives to employee share option schemes should also be removed.

“Tax-exempt status should also be extended to foreign pension funds investing in Australian venture-backed companies,” he said.

“This status must also be applied to complying superannuation bodies that reside in Australia in circumstances where they are investing funds in venture-backed companies.

“As well, an amendment to current provisions dealing with limited partnerships is necessary to ensure that those partnerships, and particularly those from overseas, are not discouraged from investing in Australian venture capital trusts.”

Other changes the alliance believes are key to creating a more competitive investment environment include raising research and development tax concessions from 125 per cent to 200 per cent and lowering the corporate tax rate to 30 per cent or less.

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