I support the government's intent to rebalance Australia's income tax system. Making our tax system fairer and more sustainable is long overdue, though I will continue to argue that you're not rebalancing the tax system and until you commit to giving back every tax dollar you raise to income tax cuts. Otherwise, you are just raising taxes. But rebalancing the system can't come at the expense of Australia's dynamism and capacity to innovate, and it shouldn't need to. That's why my amendment requires a review of the IBCC and of indexation model more broadly as it affects innovation and small business as soon as practicable after its first year of operation.

I acknowledge the government's efforts in designing the IBCC. Its purpose is to shield productive innovative businesses from an indexation system that could otherwise subject Australian founders, employees and investors to some of the highest taxes of capital in the world, but the concession is deliberately narrow, riddled with tripwires and adds complexity. I'd like to give you an example. Yesterday, I was contacted by the founder of a small, profitable Australian digital health company. It's about a decade old with customers here and overseas, and about 95 per cent of its profit comes back to Australia. The company has just won a contract with an American client that will make it double in size. To service it, the company needs operational staff on the ground in the US. The founder now believes he may fail the predominant activity test because slightly more than half his team could end up in the US, even though the profits still come home, so, instead of celebrating, he's talking to lawyers and accountants about restructuring so the business can stay in Australia and still qualify. He's wading through this legislation at the same time I am, trying to work out if the carve-out will protect his business.

This shows that the IBCC risks undermining its own aims. It's meant to support companies scaling here and internationally, yet one of its innovation principles requires to a company to show international competitiveness, while the predominant activity test requires half of its people to be in Australia. Succeed overseas and you risk losing the concession.

Good intentions are not enough. The design of the IBCC will have real, if unintended, consequences for Australian innovators. We need a system that is fair, simple and predictable. This is what encourages innovation and investment. The truth is the IBCC is just trying to patch a flawed system. The indexation on capital gains tax is just the wrong way to tax risk taking, especially in low-capital businesses. The combination of the IBCC and indexation has three major flaws. It is complex, which chases away capital and risk taking. It is unfair. It allows a government to determine which businesses are innovative and which businesses are not. As someone who has run businesses, I tell you every single business takes risk, takes guts and is bloody hard to do. Thirdly, it is uncompetitive. We are ending up in low-capital rates, in low-capital businesses, with people paying in the 40s potentially in capital gains tax. That is uncompetitive around the rest of the world, and we cannot pretend that won't have real impacts in this country.

I urge the government. There are better ways of doing this. I have put one forward myself. I don't know that it is perfect, but it is a darn sight better than what the government is proposing right now. The government should fix this because, whatever happens, believe me, this bill will come back one day, because the IBCC and the indexation of capital gains on risk taking just make no sense.

I also want to challenge the opposition on this. You have voted against this bill, and the IBCC is as flawed as it comes, but it is the one thing that might protect some tech companies staying in this country, so do not ignore this bill. I cannot see how you would vote against this bill, because it makes a difference to innovative businesses. I hate the bill. I hate the taxation of capital gains via indexation on risk taking, but the government and certainly the shadow Treasurer should know that, if you vote against the IBCC, technology businesses that are relying on this to try and help stay in this country really matter and will be hurt by it. And if you vote against the ESVCLP and VCLP changes in this bill, that will also hurt the venture sector, which we need to support right now, because the government has made a whole bunch of mistakes in this space.

I urge the government to accept this amendment. It is very reasonable. It is asking for a review after one year, because this legislation will affect productive businesses, and this is a real challenge to the economy, and I think it is one that absolutely needs to be dealt with.