A $30 million centre for developing Australia’s cyber security industry and a $15 million digital marketplace to enable smaller companies to work with government are among the key measures in Malcolm Turnbull’s innovation statement, released today.
Other key measures involve driving more risky capital into startups, trying to attract entrepreneurial talent to Australia and getting university researchers and industry to work more closely together.
The total package involves an investment of $1.1 billion over four years which the prime minister says will “incentivise, energise, dynamise” Australian industry.
Turnbull said he wanted to usher in “an ideas boom”.
“That is the next boom for Australia. Unlike a mining boom… it is limited only by our imagination,” he said.
The government’s plan, unveiled by Turnbull with innovation minister Christopher Pyne today, has four pillars: culture and capital, collaboration, talent and skills, and, finally, “government as an exemplar”, through which government agencies should embrace digital service delivery.
There are a range of measures which are aimed at invigorating startup activity and investment.
Partners in any new Early Stage Venture Capital Limited Partnership (ESVCLP) – a form of fund which is one of the key sources of funding for startup companies – will receive a 10 per cent non-refundable tax offset on capital invested startup companies.
The maximum fund size for new ESVCLPs will also increase to $200 million from $100 million.
In another significant incentive for startup investment, individuals will be able to access a 20% tax offset in startup companies that are less than three years old, are unlisted and have income less than $200,000 the previous year.
The tax offset would be capped at $200,000, meaning it would be fully accessed if someone tipped a million dollars into a startup. There is also, as expected, a 10 year capital gains tax exemption for investments held for three years.
Crucially, a change to tax policy will allow businesses to change their business model more easily by writing their previous operations off effectively as an R&D cost. The current “same business test” allows companies to claim a tax deduction on losses if they are persisting with their business model, but this is often problematic for startups when they change their strategy after learning more about their market, known in the industry as “pivoting”.
The “same business test” will be replaced by a more flexible “predominantly similar business test”, which should reduce the tax exposure of startups that decide to pivot their operation.
There is also an $8 million incubator support programme, which the government says will “support development of new incubators and accelerators in regions or sectoral areas with high innovation potential”.
(It’s unclear from the documents what “regions or sectoral areas with high innovation potential” means. Funding for incubators – which encompass co-working spaces and startup hubs – is a particular challenge in Australia. When incubators are successful, by definition, they lose customers so their funding models are based on a volatile demand mix.)
From November next year there will be a new “entrepreneur visa” available to people with “innovative ideas and financial backing” which will provide a pathway to permanent residence. The government will also make it easier to for postgraduate research graduates with a qualification in science, technology, engineering or mathematics – the so-called STEM subjects.
The bankruptcy default period will be shortened from three years to one year because, the government says: “current insolvency laws put too much focus on penalising and stigmatising … failures”.
The impact of university research on industry will be actively measured and the scope of success measurement for Australian researchers will be broadened to also account for impact on industry, as well as a track record in publication.
The government will spend $51 million package over five years targeting coding activity in schools, with measures including online computing challenges for Year 5 and 7 students, ICT summer schools for Years 9 and 10 annual ‘Cracking the Code’ national competition for years 4 to 12 and support for teachers to increase IT-related activity in the classroom.