Tax Reform Could Drive Investment to Australia's Largest Firms

Geoff Wilson, Chair of Wilson Asset Management, said that proposed capital gains tax changes will be a disaster for small companies.

These reforms could shift the landscape of Australian investment by reducing the tax discounts available to smaller businesses. This shift may discourage investors from backing emerging enterprises, potentially concentrating capital within a few dominant corporations.

Wilson provided this testimony during a Senate inquiry into capital gains tax reforms in 2024. He said the changes would channel investor money into Australia’s 10 largest businesses, effectively starving smaller firms of necessary growth capital.

To illustrate the scale of the risk, Wilson cited the current state of the Australian equity market. He said the market is valued at approximately $3.3 trillion ^[1]. Within that total, the top 10 companies alone account for about $1.1 trillion ^[1].

Wilson said that because of the proposed reforms, the money that would typically flow to the rest of the market will instead go to these top companies. He said the potential outcome for small-cap businesses is a disaster.

The proposal from the Labor party seeks to modify how capital gains are taxed. By reducing the discounts available to smaller entities, the government aims to alter revenue collection, but critics like Wilson argue this creates an uneven playing field.

Small companies often rely on these tax incentives to attract venture capital, and private equity. Without these advantages, the incentive to take risks on smaller, innovative firms diminishes, leaving the largest listed companies as the primary beneficiaries of domestic investment.