Australia needs to lower the capital gains tax, not increase it, says Xero boss

As the federal Treasurer pursues a tax on unrealised capital gains on super, Xero chief executive Sukhinder Singh Cassidy says Australia should focus on incentives to make start-ups thrive.

Xero chief executive Sukhinder Singh Cassidy.

Australia needs to create a “more friendly” tax environment to allow the start-up economy to thrive and attract more workers to the tech sector, says Xero chief executive Sukhinder Singh Cassidy.

Australia needs to create a “more friendly” tax environment to allow the start-up economy to thrive and attract more workers to the tech sector, Xero CEO Sukhinder Singh Cassidy says.

This includes overhauling capital gains tax, which the re-elected Albanese government plans to impose on unrealised gains on superannuation accounts, a move that has been condemned widely by other business leaders and investors from Ryan Stokes to CSL chair Brian McNamee.

“The US is a very friendly place for somebody to start a small tech business and have very low taxes and capital gains. Venture capitalists are very much incented to also get capital gains treatment,” Ms Singh Cassidy said.

“Looking beyond just upskilling your tech workers, it’s about enabling the start-up economy to continue to thrive.”

The Tech Council of Australia estimates the nation will need to employ an additional 653,000 tech workers by 2030. This represents an increase of 186,000 ­versus a “business-as-usual ­approach”.

An influx of workers are needed in the sector to ensure Australian can capitalise on the artificial intelligence boom, which the government forecasts will inject up to $600bn a year into the economy by the end of the decade.

At Xero, Ms Sukhinder said she was exposing workers to “global mobility” and giving them the “tools to do the best work of their lives”, adding: “They can learn across our markets. We are a global workplace.”

For investors, she is focused on capital growth rather than paying dividends soon, saying Xero – which has a market value of $27.8bn – can double its size as it delivers a string of profits, including a 30 per cent bump last year.

“I don’t think we expect to propose anything imminently,” Ms Singh Cassidy said when asked when Xero would pay a dividend.

“We’re going to keep focusing our capital first and foremost on that rule of X and rule of 40.”

The rule of X is a modification of the rule of 40, which generally holds that a company’s revenue growth plus profit margin should be 40 per cent or more: for example, revenue growth of 20 per cent and a 20 per cent margin.

It’s a mantra that Xero has been repeating as its share price soars. Since the company’s listing on the ASX in 2012, its shares have surged from $4.65 to $181.08 – an increase of more than 3700 per cent.

In the year to March 31, Xero’s profit soared 30 per cent to $NZ227.8m ($209m), while revenue jumped 23 per cent to $NZ2.1bn.

Its free cashflow margin rose to 24.1 per cent, from 20 per cent a year earlier.

Xero’s shares rose 4.7 per cent to $182.05 on Thursday.

Originally published as Australia needs to lower the capital gains tax, not increase it, says Xero boss