Here's what Australia's startup sector is expecting in the 2015 federal budget

Photo: Steve Robertson / Getty Images

The federal budget is one way the government sets up the economic agenda for the country and with a number of startup initiatives expected to be detailed within it, this year’s could be a blueprint for how the nation expects to transition towards an innovation driven economy.

“If we put in place the right policies that encourage greater domestic and offshore investment, we stand a good chance of seeing a major pickup in economic activity and new employment over the next few years – that’s precisely the reason why the federal budget is such an important ingredient in rebuilding consumer and business confidence in our future,” AVCAL CEO Yasser El-Ansary said.

He explained Tuesday’s budget plays a critical role in laying out a plan for Australia’s future.

“We have an unprecedented opportunity right now to pivot our economy towards a much greater focus on high technology and high innovation industries, which have the potential to catalyse significant new employment opportunities,” he said.

To establish an innovation-driven economy, AVCAL said the government needs to reform a number of policies including venture capital tax rules to encourage greater domestic investment into startups, altering the Significant Investor Visa Programme rules to require an allocated component of the capital to flow into venture capital funds which invest in Australian businesses.

AVCAL explained implementing an effective equity crowdfunding regulatory framework that balances the potential economic opportunities for entrepreneurs against consumer safeguards for those investing in startups was also required to lift the funding environment.

“The budget parameters will confirm that the Australian economy is vulnerable to the effects of global markets and low levels of business and consumer confidence. So what this budget should be doing is putting in place policies that encourage businesses to invest in capacity-enhancing resources and new technologies,” El-Ansary said.

The budget will reveal exactly how a planned 1.5 percentage point cut in tax will be applied to small businesses. It will also include a reformed employee share scheme that should help startups attract and retain talent. It’s also expected to enable startups to make an immediate tax writeoff of legal and accounting charges in connection with establishing a company.

Here’s what Australia’s startups are expecting to see in the 2015 federal budget.

DigtialBTC Executive Chairman Zhenya Tsvetnenko wants initiatives which improve startup cashflow.

The Government has started to make positive progress on major startup disincentives like employee share schemes taxation and I support the recent move to allow new businesses to immediately deduct professional costs of starting up.

A new business can be costly and so access to increased cash flow at the beginning will allow businesses to grow faster.

However, compared to other countries, entrepreneurs in Australia are still at a disadvantage.

We continue to face hurdles and red tape with the regulatory environment and shortage of available capital, even for high-quality startups, so there is a need for incentives to encourage investment into the space.

My company has benefited from Government export grants, and we would like to see more of these types of benefits made available for hot Australian startups looking to go global.

Bulletproof Chief Customer Officer Mark Randall is all about the employee share schemes.

We would welcome further moves by the federal government to allow companies to more easily set up employee share schemes, which they have indicated. We'd also like to see more movement on redirecting the Research & Development tax rebate to small companies, rather than large ones.

Innovation has traditionally been driven by startups who disrupt the status quo, like Kogan, Xero, REA Group and Seek. Government incentives to continue this R&D spend in Australia and focus on innovation will help companies develop and commercialise new ways of doing things, creating more leverage and innovation in Australia than giving those incentives to larger and more established companies.

There has also been talk about the government adopting a cloud-first policy among government departments, but this has moved slowly. With the need for major IT overhauls at the Australian Bureau of Statistics and Centrelink, we'd like to see greater action on how cloud computing could help government departments become more flexible and agile in how they deliver services to taxpayers.

DriveMyCar Chief Executive Chris Noone is excited about immediate write-offs of professional costs.

I think we're going to see the much needed streamlining of the R&D tax incentive process . This will enable refunds to be paid closer to the date of actual expenditure so that they can be re-invested. I’m also really glad to see plans being introduced by the government to implement the immediate write-off of professional costs related to business set up. It’s all about getting rid of the red-tape and this particular change will be welcomed by anyone who is looking to start a business.

Technology and startup businesses deal with complexity and relentlessly fluid competitive environments every day, so a clear policy platform from the Federal Government that provides businesses with confidence to invest would be a great start. Reactive programs and knee jerk decisions do little to make the job of growing a business any easier. As an Australian company, we would like to see the Federal Government place more emphasis on ensuring that foreign technology companies pay their fair share of tax in Australia and return some of that windfall in the form of incentives to Australian businesses.

Fillr co-founder and CEO Chris Koch wants a system established which keeps Australian startups at home.

There has been a lot of recent talk and ‘noise' about creating a more supportive environment for startups, and facilitating innovation in this country. Let’s hope their is more bite than bark in this next budget… tangible tax incentives, actual reduction in compliance and better employee share scheme rules to help us retain staff and stop the brain-drain.

A healthy and sustainable tech industry starts at the bottom, at the startup level. Many tech startups leave to friendlier environments like the US and UK. Why can’t Australia produce the next Google or Amazon? Combined they have over 200,000 employees. That’s a lot of jobs, which is great for the economy. It’s time for the government to turbo charge our tech industry.

Rare Birds founder and CEO Jo Burston thinks crowdfunding is critical.

The government is beginning to recognise that the Australian startup and entrepreneur ecosystem needs their support if we are to be competitive on a global scale.

The previous year has seen some positive changes which will assist startups, such as the employee share scheme and tax concessions for smaller businesses, however they are only a starting point. I think the government has a long way to go, especially compared to New Zealand and the way they support entrepreneurship.

New Zealand's equity crowdfunding model allows companies to raise up to NZ $2 million per year from the public, whilst here in Australia start-ups are restricted to seed funding or angel investors.

Crowdfunding is critical for start-ups and younger entrepreneurs, who may not be able to access capital from a traditional lender. If you look overseas, you see that the US, the UK and New Zealand are all ahead of Australia in this respect, and its time the Australian government caught up.

VentureCrowd CEO Jeremy Colless wants an open, equity crowdfunding system.

We would welcome moves by the federal government to open equity-based crowdfunding to all Australians.

Liberalising this sector has worked well in other countries and we already know that equity-based crowdfunding works in Australia with sophisticated investors — VentureCrowd has raised more than $2 million alone for startups to date, and we’re currently raising the largest ever Australian equity crowdfunding round from sophisticated investors for ingogo.

In order to be successful, the government’s equity crowdfunding policy cannot be too restrictive or prescriptive on retail investors, or inhibitive on start-ups that choose to use this investment method. There are models globally that have worked, particularly in New Zealand, and we think it can be a massive boost to private sector funding for Australian innovation.

Xero Australia MD Chris Ridd wants a simpler system.

We'd of course welcome any reduction in red tape for small businesses to simplify and make it easy to both start and maintain a business. But we'd also appreciate a clear and straightforward definition from government of how they view a ‘small business’, as at the moment the exact definition of who these policies apply to is in flux.

The government has said it will cut the tax rate by 1.5% for small businesses but it should be simple to administer and apply to all entity types, and not just companies.

We'd like to see some form of government backed ‘low or non recourse lending’ to assist eligible startups and existing small businesses to leverage the record low interest rates. It is the lack of access to capital often required to grow a business which holds many back from achieving their potential. Applicants are required to put up their house and personal asset base as security for a relatively small cash injection, and as a result many decide not to take the risk.

We would like to see the government consider a tax-free period for small businesses that are in the startup phase. This would free up cash flow and encourage business owners to invest more into the business in the early stages and likely increase the success rate of SMEs in those critical early years of getting started.

We also believe that cloud accounting will ensure small businesses can thrive and grow as a result of being able to leverage automation and have real time data at their fingertips. It would be good to see government incentives in the form of rebates or other measures being provided to encourage the transition to web based platforms, especially in light of the ATO’s Digital by Default strategy. This is not just for the physical costs of migrating data to the cloud but also incentives for education undertaken by a small business owner and their staff and how to use the solutions.

Doug Morris, General Manager, Sharesight says dropping as many regulatory and tax barriers as possible is essential for tech startups.

Based on comments from Treasurer Joe Hockey and Small Business Minister Bruce Billson, I expect to see changes to allow faster write downs for startups and the ability to change their business structure without tax penalties.

Both are be welcome changes, but are overdue reactions to policy set during the industrial age of last century.

I really hope the government understand that today 'small business' means 'technology business.' In the fintech industry, for example, services and information are delivered purely online. We're not manning a lemonade stand.

My fear is that government officials themselves don't participate in this economy, and therefore, don't understand it. I recall with a forehead smack, Stephen Conroy's 2009 plan to 'filter the internet.'

And we'll see how Centrelink's new one billon dollar computer system roll-out goes. The fact that the current system 'cannot send real-time information regarding the processing of a claim to customer's digital account' is a depressing indicator of government's technology prowess. In the real world, that's called an email.

We would like to see a clear indication that the government will lower taxes on startups, policies to attract global talent, and then to basically get out of the way.

Further enhancements to the research and development tax incentive and the employee share option scheme would be simple ways to expand upon policies that are beginning to work well.

An embrace of crowdfunding would not only be a terrific way to fund local talent, but would also convince companies to base themselves out of Australia. We have such a rich history of connecting individual investors with capital markets. Look no further than our enthusiasm for listed mining companies and DIY superannuation.

We're lucky to have a highly educated population in a safe country, which is consistently touted as one of the world's best places to live. Today's technology entrepreneurs are mobile and hungry for life experiences. Australia should rank as their number one destination. A tech startup on the beach is unbeatable.

The budget should reflect that technology companies are vital to the future of the Australian economy, but we're in a global talent war, and dropping as many regulatory and tax barriers as possible is essential.

Compared to European parliaments or the US Congress, Australia has an agile government. This is their own startup moment, and they shouldn't waste it.

Aeeris CEO Kerry Plowright hopes the Budget will maintain R&D tax breaks.

The R&D tax breaks encourage companies to innovate, and there is a broader community benefit from that in terms of products and services that meet important needs.

It would also be on my wish list for them to enhance the support for R&D, including reinstating an Innovation Fund through the Department of Industry.

More broadly, the entire tech sector will benefit from the penetration of high speed internet, not only in the cities, but in regional and rural areas where the use of ICT technology and its products such as apps and online services dissolves the enormous barriers of distance that are fundamental to Australia.

Tank Stream Ventures Managing Partner Rui Rodrigues wants a solid commitment to support startups.

I would like to see a strong commitment from the government towards supporting innovation and the tech space in particular.

It’s without a doubt that we are living in a technology-driven world and supporting the tech sector can and will have a strong impact on the economy. The budget and its specific measures can hamper or develop innovation and thus impact economic growth depending on how effective they are.

This can be done in multiple forms but all require a long-term commitment. We need to democratise access to capital for startups and I have high expectations that the government will follow on its promise to provide the regulatory frameworks for equity crowd funding, in which we are currently lagging behind countries like the US, UK and NZ.

The government must also create the right incentives and not penalise investors and startups. It is very important to incentivise institutional investors to invest locally in this space to provide significant financing opportunities at all stages of development. For example, a tax break exists right now for investors going through a fund like Tank Stream Ventures, however we’d like to see Australia follow the UK example and open up more capital for startups by applying similar tax breaks for small individual investors and also big institutional investors.

We also need to incentivise and develop ICT skills and computer science education or risk facing a shortage of strong technical talent in the medium term. It is already likely we will face a shortage, so while there will be lots of opportunity to create new Australian businesses, there will simply not be the talent to start them.

Finally, it’s unquestionable that the private sector has a crucial role to play and we are doing that already by investing in promising tech startups. However, the government should also facilitate innovation by supporting the sector and building the necessary foundations for what promises to become one of the most significant sectors of the economy.

MoneyPlace CEO Stuart Stoyan wants to see real change, implemented quickly.

It’s great to see the government supporting small businesses, and specifically startups. Australia is transitioning away from being dependent on mining and needs to look to new, innovative businesses to drive growth and create jobs.

For too long Australian conditions have not supported startups, which has resulted in a flight of talent to more favourable environments overseas. We hope to see small business tax incentives and a broader reduction in red tape for new and emerging businesses.

While a reduction in corporate tax rates has been proposed, I’d rather see greater tax incentives for R&D, accelerated depreciation and an investment allowance - policy that will encourage businesses to invest in Australia.

Most importantly we need to see real change implemented quickly. There is a risk that the budget only provides lip service to these issues and changes are watered down and eventually implemented after lengthy delays.

It is time for the Government to demonstrate that it supports Australian startups with swift action, so that startups move on and focus on building great businesses.

Decimal Software CEO Carolyn Colley isn't holding her breath.

At this stage we expect to see little or no major change in the budget.

We’d like to see the Budget provide a range of measures that address both the immediate challenges being faced by startups and also provide a framework for sustained economic growth in the future.

The two key challenges facing all early stage businesses are the ability to access funding and the ability to preserve cash. Despite recent cuts to interest rates, banks remain conservative in investing in startups. This forces startups to have to look for alternative to get funding, like venture capital which at certain stages of evolution is especially difficult. It’s the reason you see a pretty high failure rate of good technology startups.

We’d like to see the government play a much more proactive role by helping to promote the benefits and educating the market on understanding innovation and entrepreneurialship to start the flow.

Further concessions are also required to help businesses survive in the early stages of set-up. R&D tax credits and payroll tax credits rebates only just begin to start that process, they’re not big enough to make the impact required to make a difference. While they show intent they require further endorsement and recognition of other areas such as recruitment and professional services fees - a sensible approach to new start employee equity schemes is long overdue to enable startups to compete for talent.

We’d like to see the government take a holistic view of how we’re going to solve this problem for the longer term. Until that happens it’s going to continue to be challenging.

Where4Events CEO and founder Caroline Woodhouse is hopeful.

I am hopeful that the government may acknowledge some value in encouraging entrepreneurs and early startup businesses.

The Government can do this by streamlining and simplifying red tape to reduce compliance costs, creating a greater awareness of researchand development tax and other tax incentives. Immediate depreciation of professional, government and allied tax incentives would be well regarded.

Given opportunity in the budget to support innovation, local companies like Where4Events will have the opportunity to become world leaders.

Innovation drain sees Australian companies leave our shores, with intellectual property and the benefits to all Australians are lost. Reward innovation and we all win.

I would like to see simplification of the regulatory and compliance burden, together with tax incentives to encourage Australian investors to support innovation of new ideas.

To protect and retain intellectual ideas and assets to shift Australia’s reliance on natural resources to being a more resourceful hub currently and for future generations.

Australians and its Government needs to appreciate that its intellectual resources and capacity has the ability to become our greatest export. This requires Government decisions that encourage investment in innovation particularly in startups.

If accelerate R&D for the digital space is opened up Australia can grow its own Silicon Valley and stop the innovation drain.

We have learned through experience how difficult IP and trade-marking can be in Australia. We would also like to see more support in IP for trademarking and patents for entrepreneurs/ startups.

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