The 10 things Australia needs to do to become the best place in the world for startups

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  • StartupAUS today released its annual Crossroads Report.
  • The advocacy group makes ten recommendations to ensure a healthy startup sector.
  • Among them are changes to R&D tax incentives and ways to encourage corporates to invest in startups.

StartupAUS, in the national startup advocacy group, has released its fifth annual report card, Crossroads 2018 Report with recommendations to ensure Australia is a smart country.

Among the recommendations are better tax incentives, an entrepreneurship academy, harbour protection from copyright infringement, and better rules around options for employees of startups.

“We’re trying to make Australia one of the best places in the world to build and grow a startup,” says the report.

“To do that, we need to get the settings right on a broad range of issues like tax, visas, skills, education, business regulations, and direct support.

“Our ambition for the overall effect of these recommendations is high, and the test is simple: if we were to do all of these things, would Australia be one of the best places in the world for startups? Unless we think the answer to that question is yes, we don’t move forward.”

StartupAUS’ recommendations:

1. Amend R&D tax incentives to support software

StartupAUS says shifts in the way the R&D Tax Incentive operates have increasingly made it unreliable for software companies and a growing number are facing serious financial challenges as a result.

“While this uncertainty prevails, reviews of software claims by small companies should be halted,” says StartupAUS.

To resolve the issue, clear language supporting software development claims needs to be added to the R&D Tax Incentive legislation, or a new program developed to support software.

2. Copyright Safe Harbour Protection

An Australia-based online content host, unlike in most other developed countries, is liable to be sued for copyright infringements on its platform by its users.

StartupAUS says this is a barrier to the growth of a whole industry of cloud-hosted content which is growing rapidly elsewhere.

Copyright safe harbour protection would be a cheap, effective, and fair way to help make Australian technology businesses more competitive with international counterparts.

3. Speed and certainty for startups under the export market grants

The Export Market Development Grant (EMDG) reimburses for some export-related costs. The scheme is structured in such a way that it is, by startup standards, slow to receive make reimbursements and hard to forecast exactly how much the that will be when it arrives.

“An EMDG stream that allowed young high-growth businesses to access a certain pool of funds earlier in the process would substantially increase its utility for startups,” says StartupAUS.

4. Employee share schemes

StartupAUS says options for employees is a central element of remuneration policy for most successful technology companies. In Australia, this is covered by Employee Share Scheme (ESS) legislation.

“While the situation for startups has improved since 2015, updating the scheme based on usage patterns and demand would help make it world-class,” says StartupAUS.

Startup exemptions should be available to a broader array of tech companies and employees should not be counted as investors for relevant corporations legislation governing private firms.

5. Early stage innovation tax incentives

Australia’s angel investor tax incentives, which are applied to Early Stage Innovation Companies (ESIC), were introduced in 2016 with an initially narrow scope of qualifying companies.

“With more than two years in operation and no sign of an unforeseen explosion in uptake, there is now room to expand this program to allow a broader range of genuine startups to qualify,” says StartupAUS.

“Access to early stage capital remains an area for improvement across the Australian system as a whole, and a high-quality, easy to access ESIC scheme would boost performance in this area.”

6. Public data and large scale data collection

High-quality comprehensive data on Australia’s startups remains elusive.

StartupAUS says: “A funding injection for large-scale data collection efforts, with a coordinated, standardised approach, would help overcome this. Increased access to relevant public data sets would significantly boost the quality of these efforts.”

7. A national entrepreneurship academy

Dedicated institutes of excellence, in sport and the arts, have driven high quality outcomes for decades, and added formalised vocational prestige to careers in those fields.

StartupAUS says: “A national entrepreneurship academy, designed to link into school and university systems and select, train, and support a wave of world-class entrepreneurs, could dramatically boost visibility, reduce perceived risk, and enhance outcomes for would-be entrepreneurs.”

8. An entrepreneur visa

Australia’s entrepreneur visa needs significant work if it is to yield genuine economic results, says StartupAUS.

“The current visa is internationally uncompetitive, and meeting the qualification criteria is extremely difficult,” it says.

“We need to rethink this visa to make it simple, well advertised, easy to qualify for, easy to apply for, and quick to process. So far, it is none of these things.”

9. Incentives for corporates to invest in startup programs

StartupAUS says there is enormous untapped value in missed collaboration opportunities for both startups and large enterprises in Australia.

“A tax incentive, in the form of a list of eligible activities which would qualify for a tax offset, could help address this market gap,” it says.

“Such an incentive would make expenditure on startup-focused programs more attractive to large enterprises, and shift decision making towards collaborative efforts.”

10. An innovation ambassador

Global tech firms tend to have significant commercial footprints in Australia but few do any research and development (R&D) here, says StartupAUS.

“Attracting more high-value tech R&D would boost talent levels, attract firms in adjacent fields, drive collaboration, and increase commercialisation opportunities,” it says.

“As a first step, Australia should appoint a well-resourced national innovation ambassador tasked with attracting R&D investments in Australia from high value global tech firms, with clear deals-based performance criteria and strong political and regulatory support from both state and federal governments.”

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