Have startups fallen off the radar? Here’s what they think of the...

Have startups fallen off the radar? Here’s what they think of the 2017 federal budget

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Off the back of the recent federal budget announcement, we have heard from several members of the Australian startup and small business community about its implications for them.

StartupAUS, Australia’s peak advocacy group for startups, acknowledged support for fintech in the 2017-18 Federal Budget, but noted there was a lack of focus on innovation or entrepreneurship.

CEO of StartupAUS Alex McCauley, said: “There clearly isn’t a focus on startups or innovation in this budget. That will certainly cause some frustration, because the Government has done a lot to build expectations that it is committed to making Australia one of the best countries in the world for innovators. It still has a lot of work to do to deliver on that commitment.

“We welcome this Budget’s support for certain segments of the innovation sector. It includes new measures to increase competition and access to data in the banking sphere, along with taxation reforms for digital currencies, which will help Australian Fintech companies. It also includes plans to introduce Crowd Sourced Equity Funding for proprietary companies, which is a step forward for startups looking to raise crowdfunding. It’s encouraging to see advanced manufacturing attracting additional support, too.

“Nevertheless, these measures are modest, both in terms of their budget impact and their overall effect. Innovation and entrepreneurship are not major focal points of this budget. In his budget speech last year, on the back of the launch of the Government’s laudable National Innovation and Science Agenda, Treasurer, the Hon. Scott Morrison, said that ‘harnessing the power of innovation and entrepreneurship, to create our own ideas boom, lies at the heart of our plan to support jobs and create growth’. In this year’s speech, entrepreneurs were not mentioned. Startups seem to have dropped off the radar.

“Tonight the Treasurer said that ‘the signs of an improving global economy are there to see’, and that he saw the ‘potential for better days ahead’. Technology will play a big role in delivering economic value around the world in coming years – in order for Australia to benefit we must maintain a strong commitment to supporting the development of young, high-growth, innovative Australian businesses.”

Alex McCauley, CEO StartupAUS
Alex McCauley, CEO StartupAUS

What do startups think of the 2017 Federal budget?

Jeff McAlister, CEO of TryBooking on 457 and foreign workers: “We have long claimed that we could not hire enough local workers to grow our business – also we were unable to meet the training requirements for 457 sponsorship. It it good to hear that this will be replaced with a $1,200 levy per foreign worker per year. This will help us grow our local workforce and global business aspirations.”

Jeff McAlister, CEO of TryBooking
Jeff McAlister, CEO of TryBooking

On multinationals and tax avoidance, Jeff said: “We think that the government needs to further crackdown on multinationals not properly adopting current GST obligations, we are competing against foreign ticketing companies with a clear base in Australia that are dodging fair GST obligations by passing the payment and reporting obligations onto their customers. We seeks a fair play ground in this regards as our quoted prices always includes GST while foreign competitors may not.”

Trevor Townsend, Managing Director Startupbootcamp Internet of Things & Data Melbourne on the lack of startup investment and crowd sourced equity funding: “It’s good to see further changes to crowd sourced equity funding in the budget, but it appears that the new economy is no longer a priority for the federal government.”

Trevor Townsend, Managing Director Startupbootcamp
Trevor Townsend, Managing Director Startupbootcamp

Rob Hango-Zada, co-founder and co-CEO of Shippit.com on the crowd-sourced equity funding extension: “I think it’s a massive win. Basically it allows small time investors to get in on the startup book in Australia and also allows startups to benefit from a consumer investor market without the need to find angels and high net worths to help them bridge funding gaps or make a break. It’s the opportunity for the market to take that forward though, i.e. startups which will help create these marketplaces. Allowing consumers to invest will mean better valuations if they share the vision and want to participate in startups without needing to go all in.”

On the tax break, Rob said: “I think extending the tax break is a great initiative by the government to relieve pressure on SMB owners. This focus on reducing red tape and effectively removing barriers to establishing businesses in Australia works toward a culture of innovation which can only be good for the economy.”

Shippit co-founders William On and Rob Hango-Zada
Shippit co-founders William On and Rob Hango-Zada

On the instant asset write off, he remarked: “The $20,000 instant asset write off is great for conventional SMBs that are at the stage of turning a profit. Tech startups are inherently capital heavy to establish with most running at a loss for the first 2 years through the establishment phase.

“Given that new age SMBs or “startup” businesses would lack the P&L characteristics to benefit from the write off, what more is being done around innovation grants / funds to help finance innovation in tech. Or alternatively is this being driven by tax breaks for investors as per the ESVCLP initiative?”

Clive Rabie, CEO for cloud accounting provider Reckon, on extending the instant asset write-off for small businesses: “We welcome the Government’s decision to extend the $20,000 instant asset write-off for small businesses to 30 June 2018. Now that the Senate has also passed legislation that increases the small business entity turnover threshold to $10 million, this means more businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000, helping them to expand, pursue new ideas and create more jobs.”

Clive Rabie, CEO Reckon
Clive Rabie, CEO Reckon

On the GST debate and eliminating inefficient state taxes, Clive said: “Last week, Chartered Accountants Australia and New Zealand called on Treasurer Scott Morrison to use the Budget as a platform to open the GST debate and eliminate inefficient state taxes. Besides announcing efficiency measures, such as the removal of double taxation on digital currency like Bitcoin, it was a missed opportunity to discuss the GST more broadly against other taxes.

“As shown by a recent Reckon survey to over 1,200 small businesses, more than 9 in 10 (92 per cent) of respondents believe it’s important for the federal and State Governments to work more closely together to deliverpayroll tax relief. Something as basic and fundamental as hiring staff to keep your operations running shouldn’t present such a burden for business owners.”

“The $300 million in funding announced by the Government to form a National Partnership of Regulatory Reform with State Governments and Territories to reduce red tape for small businesses is welcome, however it is disappointing that high payroll tax rates were not addressed at a national level. Victoria has already moved to reduce payroll taxes, including bold cuts to help regional Victorian businesses and boost job creation. There’s no need for big promises and idealistic plans, just a clear stepped approach to tackling taxes levied on businesses one area at a time.”

Wayne Gerard
Wayne Gerard

Wayne Gerard, Co-Founder and CEO, RedEye said, “I think the startup community has a great opportunity to get involved in this year’s Federal Budget. The Government has an opportunity and responsibility to create an environment that generates more high paying jobs. Startups should be involved in making every budget-funded program more efficient, easier to deliver and more accessible to every Australian. Involving Australian startups and scale-ups in the delivery of the spending programs proposed in this year’s budget will deliver more high paying jobs – and not just construction jobs.

“There is enormous funding of $75 billion in proposed infrastructure — plus defence, healthcare, education and regulatory programs. Everyone of these programs could use technology developed by Australian startups and scale-ups. The money is being allocated and spent anyway, so why not spend it in Australia, supporting Australian startups and scale-ups, and creating new jobs in our digital economy.

“The treasury talked about penalising companies that employ foreign workers, we should also penalise budget-funded programs that don’t engage with Australian startups and scale-ups. It makes sense, why buy foreign technology to use on these budget programs when we can grow local startups that employ more Australians?”

Sarah Moran
Sarah Moran

Sarah Moran, Co-Founder and CEO, Girl Geek Academy said, “Last night’s Federal Budget is concerning for our young people, and the startups and technology industry that are now, more than ever, relying on our schools and universities to pump out the highly skilled STEM graduates we desperately need. The Government is funding Gonski the same way they funded the NBN – and this approach didn’t work out well for our NBN at all. I’m worried that we will see schools end up with only 75 per cent of their needs met at this critical time. Additionally, putting up the university fees by 7.5 per cent is also a disaster – especially with youth unemployment already being so high.

“I would also like to flag concerns over the welfare payments. Heaven forbid we end up like San Francisco, where the collective community issues, like homelessness, become somebody else’s problem. Cutting people off from welfare instead of rehabilitating them is so dehumanising. We shouldn’t accept our tax dollars funding something we wouldn’t want for ourselves.”

Tanya Titman
Tanya Titman

Tanya Titman, founder of female SME growth program, Acceler8  remarked, “The extension of the $20,000 tax write off for SME’s appears to be the only good news story for SMEs in this year’s Federal Budget. It is a great initiative that fuels spending from small business owners in the lead up to 30 June. However, it also places many small business owners in a precarious cash flow position in trying to fund a last-minute spending spree. Whilst a tax deduction is great, it is only a good business decision if the asset you are purchasing is going to be used to grow your business. It is important that business owners don’t fall into the trap of spending money to get a tax deduction.

“To put this in perspective, you are spending $20,000 to save $6,000 in tax. This is a net $14,000 cost to your business and a $20,000 hole in your short term cashflow at a time when you will have your BAS, PAYG Withholding and Tax Instalments to pay shortly after. I recommend business owners consider financing the assets rather than taking a direct hit to their cashflow. It is important to consider the short and long term cash flow impact of taking advantage of this tax incentive.

“Disappointingly, there does not seem to be any initiatives for business women in this year’s Federal Budget. The current maternity payment arrangements are structured to keep women out of the workplace after having a baby. A nice concept, but one that is not achievable for most women running their own businesses. Whilst some great ideas have been pitched in terms of overcoming these short sighted arrangements, including providing a 12 month timeframe in which the leave could be taken in short blocks without jeopardising the payments, the lack of support for women in business in this year’s budget is unfortunately becoming very apparent.”

Andrew Barnes
Andrew Barnes

Andrew Barnes, CEO and cofounder of online marketplace for training, GO1.com said of the 2017 Budget: “The general economy is going strong and whilst there hasn’t been a significant focus on startups in this year’s federal budget, there are a number of positive measures and a rising tide lifts all ships. This puts Australian tech entrepreneurs in a position to continue to build scalable businesses and add to our growing startup ecosystem.

“It’s great to see the federal government pushing the small business agenda with the extension to the asset write-off program, a commitment to lowering taxes, and the introduction of incentives to reduce red tape. The reality is that all startups start as small businesses and these initiatives present further opportunity for startups to propel forward and scale. I hope to see this momentum continue.”

Beau Bertoli
Beau Bertoli

Beau Bertoli, joint CEO at Prospa, Australia’s leading online lender to small businesses commented: “These budget announcements mark a line in the sand. Consumers, small business owners and the big banks can no longer ignore the government’s confidence in the fintech industry as a way to deliver faster, better, lower cost financial services. This will have a huge impact on consumers’ perception of fintech options. Research shows trust is key to building customer relationships and governments can have a positive impact by ensuring a level of consumer protection is enforced.

“New measures like the enhanced regulatory sandbox and reducing restrictions on using the term ‘bank’ will increase innovation and clearly demonstrate the government’s trust in the sector. To ensure the public share their confidence, they’ve ensured protections are in place to fully protect consumers and small business owners. It’s effectively the government saying, this is the way of the future; you’ll get access to faster, better, lower cost financial services, and we’ll make sure you’re protected every step of the way.”

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