Budget 2021: No change to the RDTI, but some bright spots for startups

Budget tree

Workers take a look at the 'Budget Tree' at Parliament House in Canberra. Source: AAP Image/Lukas Coch.

In the run-up to the 2021 federal budget, there was a certain sense the focus would be on innovation, technical creativity and tech as a booster to the economy.

In some way, it is. But perhaps not in the way many in the sector would have liked.

In his speech this evening, Treasurer Josh Frydenberg will hail digital skills and infrastructure as “critical for the competitiveness of our economy”.

To those of us who live and breathe startups, that should mean investment in the early-stage tech companies that will become the next Atlassian and Canvas. To Frydenberg, not so much.

One budget policy that directly affects startups is the changes to the employee share scheme — changes that are set to come into effect within a few months, and that are designed specifically to help tech companies attract talent, even if they can’t afford to pay them in spades.

We know attracting talent has been a concern for the sector, particularly with borders remaining closed for the foreseeable future.

There is also a focus on boosting digital skills in the Aussie workforce, but that’s not necessarily focused on deep tech or software development expertise.

Rather, it’s about helping small business owners get more digitally savvy and bringing tech into the everyday throughout the economy.

And there is one policy conspicuously missing this year.

Where’s the RDTI?

In the lead-up to the budget, there was much talk around the R&D Tax Incentive (RDTI). The 2020 budget pledged $2 billion to the scheme, and rolled back controversial changes.

But confusion remained around the eligibility of software-focused businesses, leading to calls for a whole new scheme tailored just for them. That did not materialise, with the RDTI afforded just the briefest of mentions in the budget papers and accompanying materials.

Instead, tech tax incentives are focused on medtech and biotech innovation. This is an important sector, and one where we’ve seen several Aussie success stories emerge.

However, the so-called ‘patent box’ doesn’t have much to offer early-stage businesses.

For one thing, it only applies to a slither of the startup ecosystem. For another, the tax concession applies to profits made on a patent, with nothing up for grabs for early-stage, high-growth, pre-revenue and pre-profit businesses.

Still, the Morrison government has certainly picked up on the economic importance of tech and digitisation.

And while this budget isn’t jam-packed with measures specifically giving startups a leg-up, investment in the periphery is a positive — if tentative — step forward, particularly from a government that hasn’t always been as tech-friendly as we would like.

The budget encourages small businesses to invest in tech, and acknowledges the value of intangible assets.

That could lead to investment in fintech, e-commerce and payments platforms. And it values IP as an asset — one startups have valued always.

There’s $10.7 million to trial a digital skills cadetship, four industry-led pilot programs to boost ‘high-level skills’ that meet the needs of the economy.

There’s also considerable investment in AI, including education programs and grant funding for businesses solving big problems.

As we’ve also found with the offerings for the small business community, the measures benefiting the tech and startup communities may not make the mainstream headlines tomorrow, but they’re there.

That’s not to say everyone in the sector will have got what they want. But for a budget the government claimed was going to be all about creating jobs and economic recovery, there’s at least an acknowledgement that tech, innovation and startups will play a role in that.

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