Communications Minister Malcolm Turnbull has weighed in on the ‘to stay, or not to stay’ question that too many Aussie startups find themselves pondering.
In his opinion piece “We can help you”, Malcolm Turnbull tells Australian start-ups, published in The Sydney Morning Herald on March 20, 2014, Minister Turnbull attempts to address, or at least start talking about the elephant in the room. What can the federal government do to help Aussie startups? According to Malcolm, quite a bit.
As consultants for startups and the tech industry, we tend to agree. We’re in the business of cutting through the red tape that prevents many would-be startup success stories from eventuating. The government, super funds and VCs have a lot to gain through local investment but more needs to be done to provide the solid foundation required for long-term success.
In our experience, startups aren’t just asking the government for a cash handout. In fact, many of our new clients aren’t even aware of the government grants available to them until we tell them. Of those who are aware of the schemes, finding out that they are actually eligible can still come as a surprise to them. While the R&D Tax Incentive Scheme and other grants are of great help to our software startup clients. We believe that if the government were to deliver the following support mechanisms, more Australian startups would choose to stay in Australia:
1.Fix the employee share scheme problem
This is one that the federal government is already closely looking at. They have rebooted an inquiry into the taxation of employee share schemes. The current system of taxing options heavily penalises companies who offer options by making them pay the tax on them up front. Options for startups are a bit of a lottery ticket, however they are important for startups to attract staff and are heavily used in Silicon Valley. The upfront taxing of those options make them not worthwhile as it is quite possible to pay a lot of tax for options that don’t work out and become worthless.
2.Not cancel the quarterly R&D tax incentive refunds
The R&D Tax Incentive is a great scheme, however startups move fast these days and need the cash flow to do so. Enabling startups to get their R&D Tax Incentive refunds quarterly gives them an opportunity to stay ahead of the game or at least to stay in it. Having to wait a full year is a barrier many startups struggle with. We were very disappointed that the federal government scrapped the legislation that would have enabled this during the quiet holiday period. We would encourage the government to rework or revisit this idea.
3.Encourage super funds to back more local VCs
Support directly for startups is just one layer of the solution. To achieve long-term success, which is in everyone’s interest, a holistic approach to the Aussie startup ecosystem is key. Super funds can help by unlocking the doors for local VCs to invest in startups; current restrictions should be reconsidered and the one-size-fits all approach should be reassessed from an optimistic perspective.
4.Bring back the NBN
The NBN is important for startups to have higher quality internet infrastructure from which to do business. Startups are now often working remotely or from the home, which is where the NBN would do the most good.
Overall, we’re not complaining that the topic of increased government support is on the agenda. Having an open discussion is a very good place to start. We’re looking forward to seeing some action.