What Australian startups are saying about the 2016 budget

Australian startups have delivered mixed reactions to the 2016 budget.

While generic changes, such as the lowered tax rate for SMEs, and instant tax deduction for equipment purchases under $20,000, were welcomed, a number of startups said they were hoping for more from the “innovation” prime minister, including concessions for investment in R&D and greater encouragement for incubators and accelerators.

But with tax breaks and incentives for SMEs at the forefront of Scott Morrison’s budget, it seems startups and venture capitalists were generally pleased.

Here’s what these Aussie startups thought:

Phil Morle, chief startup scientist and co-founder of Pollenizer

Phil Morle. Photo: Supplied.

I am a firm believer that the next boom in Australia will start with a bunch of tiny companies today. My hope from this budget comes from seeing some blockers removed for those smaller companies to get their early traction and for some of the ‘advantages of being big’ being removed. We need to be nimble as a nation and having large companies sitting at the top of the pile, innovating slowly and fighting off the innovators is not going to help. Whilst I don’t understand it enough yet, I like the idea of competition laws being adjusted so that big companies can’t misuse their market power for dominance.

Of course, I am pleased that it is harder for huge companies to make billions here and pay very little tax. It will be interesting to see how this plays out and if we lose other things like talent and innovation capability because those companies invest less in this market. Companies like Google have a big impact our our innovation economy whilst companies like Netflix basically don’t offer anything to the economy other than cheap TV. Love it as a consumer, but would rather given my money to the now bankrupt Quickflix.

It is not just about money. Opening up a regulatory sandbox for the facilitation of testing new fintech products and services is a brilliant idea. This is a massive unfair advantage to Australian startups to invent the next generation of financial products. Initiatives like this and the serious investment in cybersecurity is the sign of a forward thinking government that understand that “forward” is now the next 12 months not the next decade. Soon, everything valuable will be ‘cyber’ and we need to be building it, capturing the value and making it safe for citizens that enjoy the value. Our cars, our cities, our health, our wealth… all benefit from a context that allows innovation to outpace everyone else.

As a university teacher and innovator I like the look of the new Youth Jobs Path. Startups need help and can be the new “trades” that teach young people entrepreneurship and invest in our talent economy. I am looking forward to learning more about this. I also love the idea of ‘Exploring being my Own Boss’ program. The big irony of our nation is that we take the default path to university so that we can “get a good job” but then when we leave we realise that a great pathway to wealth is to be self employed.

Peter Bradd, CEO of The Beanstalk Factory

Peter Bradd. Supplied

The budget address contained a lot of rhetoric around jobs and growth. The reality is, both jobs and growth and our national economic advantage won’t come from savings or these tax cuts alone, it will come from innovative business practices within existing businesses and startups.

When you consider the ASX top 20 delivers 50% of Australia’s GDP, the obvious question is how can we get the ASX 20 to reinvest more of their earnings in R&D to drive greater growth? Today’s budget did not address that question. Unfortunately, much of the government’s innovation investment to-date has been tilted towards traditional academic areas and government enterprise, neither of which have a good track-record of producing commercially compelling outcomes or jobs.

Whilst the finTech announcement and the expansion of the New Enterprise Investment Scheme (NEIS) are a step in a good direction, we need more. Research and development is critical to our future growth — I would like to see a lot more to encourage Incubators and accelerators both within the startup community and outside it within big business.

We also need a lot more creative thinking around how to encourage more young people and more Australians into high growth entrepreneurship. As demonstrated overseas, this can be done in partnership with our larger corporate community, in a way that benefits existing businesses and helps stimulate growth but also grows our startup economy.

To use the Treasurer’s words, this is a very sensitive time. We need more incentives for big business to invest in training, research and development — this is the heartland territory for workforce of the future and jobs of the future.

I’m looking towards the federal election campaign — we need both major parties to spell out how we can create an innovation hub here in Australia — we are barely at first base in that conversation.

Alex McCauley, CEO of StartupAUS

Photo: Alex McCauley/ LinkedIn.

Last night was a quiet night for startups, but there has been some fantastic work going on behind the scenes over the last few months to finalise tax incentives for startup investments. Today the legislation enacting those incentives passed the Senate, with bipartisan support, and became law.

This is a huge win for Aussie startups — it will rapidly increase the amount of capital available to them, and the sources of capital they can call on. It’s also a huge win for anyone interested in investing in startups — they now have the world’s most generous incentive to explore the investment opportunities available in this exciting space.

There has been a Herculean effort by government at all levels to get this legislation right, and to get it across the line as soon as possible. There was a real risk that if it wasn’t ready in time, this measure would be lost in the chaos of an early election. Thanks to lots of hard work, and the support of the opposition, that hasn’t happened – startups will see the effect of this from 1 July.

The fact that the government has kept working hard on this through the turmoil of an early budget and an early election is gratifying. This reaffirms the centrality of startups to the Turnbull government’s national economic agenda.

This scheme is a game-changer for startups. In the UK, where they have a similar scheme, research by Deloitte suggests the number of angel investors increased by 58% within a very short time after the scheme was introduced. If we see those kinds of numbers, Australian entrepreneurs will enjoy substantial improvements to their ability to access early-stage capital and investor talent.

We commend the Government for getting this important piece of legislation moving well in advance of the budget. We should celebrate it as a triumph for the sector, and look to build on this success and momentum in the upcoming election campaign. Both parties have great ideas in this space. We’re looking forward to working closely with them to help refine them into policies to help make Australia a wold-leader in startups and innovation.

Russell Francis, CEO of Velpic

Russell Francis. Photo: Supplied.

Allocating an additional $18.8 million over five years to the Digital Transformation Office to create a digital marketplace to make it easier for SMEs and start-ups to sell to government is an awesome initiative that the Turnbull government have copied directly from Cameron’s UK government. This is a huge initiative given one of the biggest spenders on ICT in Australia is the government. To date startups have been locked out of this via red tape, nepotism and and the old “you don’t get fired for buying IBM” mentality. The UK has G-Cloud and now the DTO in Australia will hopefully provide a similar marketplace.

The eInvoicing is a no brainer and should’ve been undertaken years ago. Private enterprise has been doing it for years — even laggards like utility companies have been doing it for some time. Better late than never. I would have concerns about how they roll it out though. Will it be one centralised system that the government runs or will individual departments be allowed to choose their provider? I would encourage individual government departments to be able to choose their own provider. If it’s one central platform then the government will choose one multinational provider, spend 10 years building it and it will become a big, bureaucratic nightmare.

Stuart Stoyan, CEO and founder of MoneyPlace

MoneyPlace Stuart Stoyan. Photo: Supplied.

While there is not much new for startups in this budget, it is reassuring to see innovation and the Ideas Boom continue to be front and centre of the government’s vision for Australia. While this is a budget for conservative times, a number of measures promoting fintech and startups more broadly are much welcomed. Specific measures for a regulatory sandbox and promotion of Australian fintech overseas recognise that fintech is a key driver of future growth. We also saw enhancements to tax incentives for startup investors, which will only help encourage much needed funding for Aussie startups.

Delighted to see the budgetback up the government’s fintech statement with specific measures aimed at supporting fintech.

Providing for a world leading “regulatory sandbox” is much needed for the fintech industry and something MoneyPlace has been advocating for, it took MoneyPlace more than 18 months to get regulatory approval. This will enable fintechs to trial new financial services products and services in a controlled environment, helping Aussie fintechs to get to market sooner.

Tax incentives for investors

Measure: reduce the holding period from three years to 12 months for investors to access the 10 year capital gains tax exemption.

Reducing the holding period from three years to 12 months to access the 10 year capital gains tax exemption will see more investors willing to fund startups and drive innovation. This comes at an important as we will look continue to raise capital to fund our rapidly growing business.

Investments in early-stage startups are inherently risky, and this will help de-risk investments and make more capital available.

VC investments in fintech

The specific mention of fintech, banking and insurance related activities with regards to venture capital tax concessions provides much needed clarity and ensure investments continue to flow to businesses driving financial innovation.

Fintech innovation

The provision of $0.2M for promotion of Australia’s fintech industry, while not a large amount, will help enable the newly formed industry body fintech Australia to promote the great Aussie fintech startups overseas. It will be used to run events to promote Australian fintechs to overseas markets and investors.

The budget’s $2.4 million for landing pads in innovation hot spots in Singapore and Berlin will also help Aussie fintechs get promoted overseas. This is especially important in Singapore, as Australia has the opportunity to become Asia’s regional fintech hub.

Small business
Reduction in tax rates for businesses with turnover of <$10M shows the government is serious about supporting small businesses, which is where every startup hopes to be soon after launch.

Michael Jankie, founder and CEO of PoweredLocal

This is a tired old boring Liberal budget. We need to balance the budget and get us back to surplus.

It lacks the innovation Turnbull inspired in us just 7 months ago and just falls back to typical Liberal statements on balancing the budget and getting us back to surplus.

Real innovation is selling the truth. The government doest really control the budget, and some spending here and cuts there don’t really shift the needle, what shifts the needle is confidence and support.

A surplus or lowering of deficit to GPD rations can only be achieved by reducing the amount of money put out into the economy. The viscous fiscal cycle is that the less money going out (government spend) the less money in private pockets. and the less money in private pockets means the less investment into growth.

The smart parts about this are capping super — meaning wealthy won’t hold cash in super where its mostly inactive, they will put it into other investments.

Lower company tax is not really going to help small business, not in a meaningful way. If companies under $10 million of revenue are hoarding cash and paying tax, it means they’re not growing. Far more valuable to business is the immediate tax deductions and the ability to use up capitol losses for similar business. Or as we in the startup space call it, pivoting.

Taxes should be lowered for larger than $10mn companies — these are the ones who are moving funds offshore to save on tax. The lower tax, is, the more will be left on-short to pay the tax in Australian dollars.

David Brennan CEO of Kikka Capital

Lowering tax rates applicable to the small business community is well supported by us. We look to fund the growth of businesses who are reinvesting in their enterprise so any additional supply of capital within the business be it tax savings or revenue ultimately contributes to growth of the sector in general.

Shifting the turnover limit for access to the $20k immediate write off is also a boon, that should encourage medium size business to invest and Kikka can help fund that.

There is a recognition in the budget that the SME space is expected to be the key driver of innovation and growth for the foreseeable future and the missing link is access to capital, which finTech general and Kikka in particular is aiming to provide.

Employee Share Scheme

The government’s move to reduce the disclosure requirements of ESOP’s is well supported by us, we have personally witnessed the tremendous benefit such programs have on attracting and retaining highly talented employees by aligning both the companies and employees interest in the form of exposure to the value created when striving for a common goal.

Data access

Any additional data that we at Kikka can access and use is highly valuable to us and ultimately our customers, the more we can understand about the customers we service, the more attractive we can make our products and service, in the form of reduced loan pricing and flexible payment schedules.

Tim Reed, CEO of MYOB

The government’s economic plan deserves a 9/10 for respecting the vital role SMEs play in the Australian economy.

This is the second year in a row where small and medium businesses have been recognized and put front and center in the budget. I have no doubt they will respond in the way the government hopes – by investing more in innovation and creating high quality jobs.

The plan to cut the company tax rate to 25% is an excellent one however the timeline could and should be shortened.

It’s like SMEs have been given a terrific present but told it is coming in pieces and they can’t open it up for a decade.

MYOB also welcomes the move to widen eligibility for the $20,000 tax write off for small businesses however the Government should consider making this a permanent feature to better support the economy.

Simplifying GST compliance has been a high priority for businesses for over a decade now so we heartily congratulate the Government for announcing a trial to streamline the process. This is something we’ve been lobbying the government about for years, it is great to see this is a government that listens to and responds to requests from small business.

Reducing the “G-Codes” or “tags” on the BAS from seven to three as part of that trial is a great step forward.

If the government had the conviction to fully address the GST issue once for all in this Budget, MYOB would have given it a 10/10, but we knew some time ago the government had no appetite to broaden the base of the GST – that is the only way to truly make it simpler for small business owners.


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