A Cloud Guru founder Sam Kroonenburg believes CGT changes will make it harder for founders to stay and build in Australia

But the federal government’s proposed changes to capital gains tax (CGT) have shaken his faith in remaining Australian-based.

His VC-backed startup, A Cloud Guru, began life in a Melbourne bedroom in 2015. In 2021, the online learning platform was acquired by US firm Pluralsight in a headline-grabbing $2 billion deal.

Kroonenburg is now a cofounder of “Canva for ads” startup Cuttable, which raised $5.7 million earlier this year and used the financial success from his previous exit to reinvest in other Australian startups, as cofounder of Glitch Capital and a partner in SecondQuarter Ventures.

“I love this country. I did not leave when I could have. I stayed, I built here, and when our company was acquired I reinvested here — in new companies, in new founders, and in the effort to persuade the next generation that Australia is a place worth building from,” he said in a submission to the Senate committee looking into the CGT changes.

Kroonenburg tells the committee, which is holding public hearings in Canberra today and Sydney tomorrow before handing down its findings on Friday, June 19, that since selling A Cloud Guru he’s focused on “convincing Australia’s brightest founders that they can compete with the world without leaving” the country.

“I have spent years telling those founders: you don’t need to move. I am not sure how much longer I can honestly say that,” he wrote.

The federal Budget’s proposed changes to CGT, which peak accounting body CPA Australia warn are “rushed and deeply flawed”, costing billions to implement, ends the 50% discount on capital gains, replacing it with CPI indexation on assets from 30 June 2027, at a minimum tax rate of 30%.

That means a shareholder in a business worth nothing to begin with, whether founder or employee, could see their tax bill double at an exit.

For example, if Kroonenburg had 25% of A Cloud Guru, worth $500 million, he’d pay $117.5m in tax under the current rules, but potentially see that tax bill double to around $235m under the budget changes.

“I have sold my company. I have paid my taxes, and I was glad to — I believe deeply in contributing to the society that gave me everything,” he writes.

“I make this submission because I am afraid this legislation will undo a generation of work to build a genuine, globally competitive Australian technology ecosystem. And I want the Committee to understand what that loss will actually look like.”

Kroonenburg said he’s deeply troubled by the legislation as it stands and the impact on Australia’s young startup ecosystem. An increase in the effective tax paid on successful founder exits will reduce the capital available for reinvestment into future startups, venture funds and angel investments, and could accelerate an exodus of ambitious startup founders overseas.

“The founders who are most likely to leave are precisely the founders we most need to keep. They are ambitious, mobile, and internationally aware,” he wrote.

While treasurer Jim Chalmers has flagged further consultation on founders and zero-cost-base assets, saying he issue “a consultation paper which sets out a position on some of these issues around startups” shortly, Kroonenburg said the existing bill troubles him “because of what it signals to the founders who have not succeeded yet. The ones sitting in share-houses and co-working spaces right now, deciding whether to build here or move”.

The risk, he believes, is that Australian entrepreneurs will increasingly choose to relocate as their companies begin to scale, for markets such as the US, Singapore and UAE.

You can read the more than 120 submissions to the Senate committee, including from FinTech Australian and Innovation Bay, here.