The High Flyers Podcast with Vidit Agarwal
00:10:07 · Vidit Agarwal, Rhea Nielsen
[00:10:07] S0: Back to the episode in a moment. I'm now joined by Rhea Nielsen, Managing Associate at one of our wonderful partners, Allens. Welcome Rhea. [00:10:16] S3: Thanks very much for having me. [00:10:19] S0: I'm happy to have you on. I believe you are an expert in the topic that we will educate our listeners on. Tell us about the recent capital gains tax changes and why have they apparently caused concern for the startup and venture capital community?
00:10:36 · Rhea Nielsen
[00:10:36] S3: So we're actually seeing quite a lot of tax reform in Australia at the moment. But one of the changes that's probably had the most attention is the removal of the 50% capital gains tax discount, which Australians have relied on for decades really. And so for gains which are accruing now from 07/01/2027, so next year, that discount's generally being replaced with an indexation system, and also introducing a minimum 30% tax on capital gains as well. And so what that means in very simple terms is when you sell an asset such as a share on exit, you'll need to adjust what you paid for it, which is your cost base for inflation. And so what you're then taxed on is really the real gain that you've made at that time. And that might work really well for someone that's bought into an established business. They've paid real money for their investment, that amount gets adjusted for inflation. So when they sell, they'll have a decent kind of cost base there to reduce their capital gain. But startups are quite different. Founders and early stage investors, they often get their equity when the business itself is not worth very much at all. And so when the business then takes off and you're thinking about what's my capital gain on exit, indexing a really small starting value doesn't get you very far at all. And of course, having a business take off and do really well is a good problem to have and everyone would like that. But without some form of relief, you can now possibly be taxed or hit with a tax bill and exit, is almost double what you would have had under the current system with that discount. So understandably, that's all led to concerns that the changes could possibly make Australia less attractive for early stage investment.
00:12:14 · Vidit Agarwal, Rhea Nielsen, Alan Joyce
[00:12:14] S0: Fascinating, interesting times. I guess stay tuned for what's ahead. Thank you Ria and now back to the episode. [00:12:21] S3: Thanks for having me. [00:12:23] S0: I always wonder like what makes someone a CEO right because there's so many people that have that aspiration but not many get there. Would you say that attitude to life is what led you to becoming a CEO eventually? [00:12:35] S1: I think so. It's also, I think there's a few things which we mentioned in the book. There were a few mentors over the years that gave me encouragement at different stages of my career. There was also getting a diversity of experience that helped. But there was one particular thing. I had this desire, and I don't know where it came from, I had this desire when I worked in Aer Lingus to emulate somebody who I thought was really good. Was the CEO of the passenger airline at the time, and he'd become a CEO at 40. And I said, want one thing, to become a CEO of an airline before I'm 40. And then had that overarching goal that I gave myself to try and achieve it. I'm very competitive of trying to get there. And I became the CEO of, I think, of Jetstar at 34, 35, and the CEO of Qantas at 42. So... But it was always in the back of my mind, what do I need to do in order to achieve that overarching goal? And thanks to mentors who gave me the experience in different levels, I managed to get there. [00:13:37] S0: And are you a believer in nature or nurture?
00:13:37 · Vidit Agarwal, Alan Joyce
[00:13:37] S0: And are you a believer in nature or nurture? [00:13:40] S1: I think it's a combination of both. I think a lot of my upbringing is thanks to my mother and father. I think it's also thanks to those teachers and mentors that were there. So I think that nurture did help. I think I'm very different in some ways. You know, if you met my brother, you say I'm similar to him, but we're very different in other ways as well. So it can't be all nature and it can't be all nurture, because we had the same upbringings and we're slightly different in different ways. Everybody's very driven in our family. You know, they all went on to great careers. One of my brothers became a director for Disney and MTV and has produced major pieces of work. The other brother is an actuary which takes a lot of dedication, another graphic designer but very different than personalities in some ways. [00:14:30] S0: I'd love to ask about your dad because that came up, you mentioned your brother, I spoke to him for research and he was very candid with some of the stories he shared I think one of the ones if I heard him correctly was about your dad, about how he almost apparently trained you to be competitive. And can you touch on that because that to me is so interesting, right? You see that in athletes where they often talk about their parents, and they go one of two ways. They either become very competitive or they hate the competition.
00:14:59 · Alan Joyce
[00:14:59] S1: Yes. It was interesting because it was little things like I think he found at one stage that we weren't doing well in mathematics, as an example. And then he would do little cards with the times table on them, and then do it between us. We were all very similar age. And then do it between us to see who would get the answers right and encourage us to be competitive on that. He was he was also... We would throw problems to us or questions to us and get us to debate or discuss stuff, and we enjoyed it. You know, we went off and did our own things. We lived in a very working class suburb, so we didn't have we couldn't afford cricket bats, but we made our own cricket bats and played cricket and got very competitive around the backyard. We played tennis over the wall between us and our neighbor. I got very competitive very late into the Irish evenings at that. And I'd say in the book that I felt like, you know, I have had three brothers. I felt like competition was the fourth brother. It was always there. It was always part of our upbringing. And my father encouraged that, and he thought it it would make us better at what we did, and I think it did.
00:16:11 · Vidit Agarwal
[00:16:11] S0: And I mean, the the other one is your... The environment you grew up in. Like, people say the island when you were growing up was a tough place to grow up. How much of that is true? Like how much of that... And then how much of it is still instilled in you? Like I very much agree with your point. Like I have that view where if someone doubts me, it just lights a fire in my belly where I will go, great, I'm gonna prove you wrong. But I have realized that leg can also be my massive Achilles heel. Like my wife always says, she's like, dude, you need to calm down. If you do this, you will just blow up. But just reflect on the island you grew up in, like how much of that shaped your approach to life?