The death of aspiration: how Australia is punishing success and our young people

The proposed removal of the capital gains tax discount does not merely change a tax setting. It changes the incentives that underpin entrepreneurship, innovation, investment, and aspiration itself. It sends a message to Australians, particularly younger Australians, that risk-taking and wealth creation are no longer things to be encouraged, but things to be punished.

For decades Australia prospered because people were willing to take risks. Small business owners mortgaged homes, skipped salaries, worked weekends, and sacrificed family time to build companies from nothing. They accepted enormous uncertainty (only 33% of new companies survive ten years) because there was at least the prospect that if they succeeded , they would share meaningfully in the rewards.

Now the government appears determined to move the goalposts.

For many founders and small business owners, removing the CGT discount on exit means they are effectively working for the government two-and-a-half days every week. After years, often decades, of stress and sacrifice, the state simply arrives at the finish line with its hand out for an even larger share of the proceeds.

And let us not romanticise what building a business actually involves. Starting a business is not glamorous. It is blood, sweat, and tears. It is paying yourself last while employees and suppliers are paid first. It is lying awake at night grinding your teeth wondering how you are going to stay afloat. It is risking personal savings, relationships, time with the kids, reputations, and mental health on an uncertain dream.

Yet rather than being celebrated, increasingly small business owners and investors alike are being demonised.

The political narrative today too often treats successful Australians not as contributors to national prosperity, but as convenient revenue sources. The result is obvious: fewer people will take the leap.

Frankly, under these settings, you would need your head read if you started a business in Australia.

This matters because entrepreneurship is not some abstract economic concept. It is the engine room of job creation, productivity growth, and innovation. The next Atlassian, Canva, Cochlear or WiseTech does not emerge from a government department. It emerges because someone decides to take a risk. If you reduce the reward for success while leaving all the risk intact, rational people simply stop trying.

The tragedy is that younger Australians are already under extraordinary pressure. Housing affordability has deteriorated dramatically. Immigration, among other factors, has added substantial demand pressure to already constrained housing supply. Whatever one’s views on migration policy, the arithmetic is undeniable: population growth without sufficient housing construction pushes prices higher.

At the same time, Australia’s tax system increasingly punishes aspiration.

The top marginal income tax rate of 47% kicks in at $190,000. In Sydney, that income is nowhere near enough to comfortably service a mortgage on a property worth even two-thirds of the city’s average house price. Yet this threshold is treated as though it captures only the ultra-wealthy. It does not. Even Labour’s greatest Treasurer, Paul Keating describes the 47% tax rate as “confiscatory”. In the US, the cradle of innovation and growth, the top-rate of 37% kicks in at USD $640,000. In China, the top rate is 45% kicking in at $210,000 putting us to the left of our communist friends to the north!

The punitive 47% rate captures everyday people, professionals, business owners, and dual-income families trying to get ahead.

So the strivers among our younger generations adapted. They looked elsewhere to build a deposit. Shares. ETFs. Managed funds. Crypto. Long-term investing became one of the few remaining ladders of social mobility available to ordinary Australians locked out of housing markets. And now even that ladder is being yanked up in front of their eyes.

The message being delivered is stark: work harder, save more, invest prudently, and we will simply tax more of the outcome away.

One is reminded of Ronald Reagan’s famous line: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.”

Humour aside, there is an uncomfortable truth embedded in that quote.

Australia does not have a revenue problem. Australia has a spending problem. Government spending has surged from roughly 21% of GDP in 2014 to closer to 28% today. That is an extraordinary expansion in the size of government relative to the productive economy. Every dollar absorbed by government is a dollar that cannot be invested by the private sector into businesses, technology, infrastructure, or innovation. Milton Friedman might have quipped, if you put the federal government in charge of Bondi Beach, in five years there would be a shortage of sand. Excessive public spending crowds out private investment and fuels inflationary pressures that are already battering Australian families through higher living costs, rents, and mortgage repayments. Another Friedmanism: “inflation is taxation without legislation”. And once spending reaches these levels, governments inevitably search for new pools of capital to tax. Today it is investors, entrepreneurs, and death taxes. Tomorrow it will be our primary residence.

The deeper issue is cultural. Nations become wealthier when they reward ambition, thrift, risk-taking, and innovation. They stagnate when success becomes politically unpopular and the private sector is viewed primarily as a funding mechanism for ever-expanding government.

As Margaret Thatcher famously observed: “The problem with socialism is that eventually you run out of other people’s money.”

Australia is not yet on the edge. But policies like these move us ever closer.

The danger is not merely slower economic growth. It is something more corrosive: the gradual destruction of belief among younger Australians that effort and sacrifice will be rewarded.

And once a country loses that belief, it loses far more than tax revenue.

This morning, I implored my Federal MP to fight these changes. If enough Australians, particularly those in marginal seats, do the same, perhaps there is still a chance to staunch the bleeding before lasting damage is done to jobs, investment, innovation, and aspiration in this country.