Election 2019: A policy guide for startups
Tuesday, May 14, 2019/
It’s finally federal election time, and come Saturday, startup founders across Australia will be heading to the polls to make their voices heard and enjoy a sausage.
We know the people in this space are a conscientious bunch, and their votes won’t be decided purely on startup and tech policy. But, if you’re on the fence, or wondering which PM will really help boost your business, we’ve got everything you need to know right here.
First of all, there are heaps of policies aimed at helping small businesses, some of which are more applicable to startups than others. If you’re interested in broader small-business policy, read SmartCompany’s small business policy explainer here.
The Liberal Party has committed $60 million to Export Market Development Grants to help Australian businesses —including those exporting services and intellectual property — to go global. However, to be eligible, you must have incurred at least $15,000 of eligible export promotion expenses, making the scheme a little more tricky for cash-strapped startups to access.
Equally, the Liberal Party has stressed it will support exports in farming, manufacturing and mining, as well as for service providers, without mentioning software or technology.
The Liberal Party has also promised to cut the tax rate for all SMEs with turnover of less than $50 million from 27.5% to 25% by 2021-22.
Unincorporated businesses with turnover of less than $5 million will also receive an 8% tax discount, capped at $1,000. This discount is set to double by 2021-22, although the $1,000 cap will remain.
The Morrison government has also pledged to increase the instant asset write-off threshold from $25,000 to $30,000 for businesses with an annual turnover of less than $50 million.
Finally, for any small businesses or startups working with the government, the Liberal Party plans to introduce a requirement that bills are paid within 20 days, for contracts up to $1 million.
On the other side of the fence, the Labor Party is also committing to dropping the corporate tax rate for small businesses to 25%, and to increasing the instant asset tax write-off threshold to $30,000.
But, it’s also pledging a 30% tax cut for small businesses hiring employees younger than 25 or older than 55. Startups with revenue of $10 million or less will receive the tax break on the wages of up to five employees, for their first year of employment.
While this policy has been largely welcomed by the small business community, and could help improve diversity in the startup ecosystem, it will not apply to startups that are not yet profitable.
It could also come with restrictive red tape.
Speaking to SmartCompany last week, Council of Small Business Organisations Australia chief executive Peter Strong said it would be important to make it easy for businesses to get the benefit of the policy, “without a lot of paperwork”.
Focus on tech
The Liberal campaign hasn’t had much of a focus on technology and innovation, which is perhaps telling in itself. And so we can only glean insight from the government’s track record.
Malcolm Turnbull’s National Innovation and Science Agenda appears to have gone out the window, and while things like the employee share scheme are getting underway, concerns have arisen the changes are happening slowly, and don’t go far enough.
The Liberal government has also removed the position of innovation minister from the cabinet, and the Federal budget last month included little about technology or innovation, and mentioned the word ‘startup’ precisely once.
Finally, earlier this year, the government passed new laws criminalising companies that host “abhorrent violent material” on their platforms. Again, this was widely criticised by those in the startup ecosystem, with many saying the rules are too far-reaching and will have a damaging effect on tech companies as a whole.
The Labor Party has failed to stop some of the most problematic changes of the past months from coming into effect. However, it has released several policies that could put innovation back on the agenda if it’s elected.
Shorten has promised $3 million to a national centre of AI excellence, and pledged to work closely with stakeholders on how the funding can best be used to support research and industry acceleration in Australia.
The policies also outline plans for a $3 million blockchain academy in Perth — the home of Aussie startup success story Power Ledger.
When it comes to the issue of an innovation minister, however, it’s unclear where the Labor Party stands.
On the face of it, with Kim Carr serving as Shadow Innovation Minister and Ed Husic — a vocal supporter of tech in Australia — as Shadow Minister for the Digital Economy, one would hope at least one minister would make it to the final cabinet. But there’s no evidence here, so don’t take it as a given.
Now, to get down to specifics. Late-2018 saw the introduction of the Assistance and Access Bill 2018, which was heavily criticised by the startup community. Although there were promises of amendments to be discussed early this year, as of yet, nothing has come of them.
Again, the Liberal Party hasn’t made much mention of the bill in its campaigning, so we can only assume that if the party remains in power, things will pretty much be business as usual.
Speaking at a Safe Encryption Australia event run by StartupAUS and Innovation AUS in March, Ed Husic promised a Labor government would push to make amendments to the AA Bill, to “make sure we fix these terrible laws”.
Specifically, Labor’s changes will prohibit introducing systemic weakness into a tech company’s systems and strengthen the requirement for a judicial warrant before communications can be accessed.
Labor has also pledged to conduct an inquiry into the economic effects of the law.
This is another area in which an ongoing debacle has caused a headache for startups. In 2017, the Liberal government announced the scrapping on the 457 visa, sparking concern it could become more difficult for tech companies to recruit talent from overseas.
The Global Talent Scheme (GTS), under the new Temporary Skills Shortage subclass 482 visa was intended to address the talent shortage, but the launch was somewhat drowned out by last year’s cabinet reshuffle.
A high bar for applicants and a lot of red tape has led to a muted response to the GTS. As of February this year, not a single application had been lodged under the startup stream.
At the time of writing, the Liberal Party had not directly addressed startup-specific visas.
The Labor party proposed its SMART visa scheme in 2017, suggesting it would help attract leaders in science, medicine, academia, research and technology, all while protecting Australian jobs. So far, it’s unclear if this is still the plan.
However, last month, Labor announced a crackdown on what it called “457-style visas”, in a bid to prevent the exploitation of foreign workers, and to get more Australians into employment.
“We should be a country who doesn’t have a temporary worker filling a skills shortage one day longer than it takes to train an Australian,” Shorten said at the time.
However, this pledge is vague, and appears to be targeted at lower-skilled positions and trades, not tech companies. Could visa changes see startups caught in the crossfire once again? We will just have to wait and see.
R&D and commercialisation
In the 2018 Federal Budget, the Coalition introduced a $4 million cap on research and development cash refunds available to companies with an annual turnover of less than $20 million, causing concern among the tech industry that R&D activity — particularly in the expensive biotech sector — could move offshore.
In this year’s budget, however, Treasurer Josh Frydenberg said the government is “backing the industries of the future”, and laid out specific funding allocations for medical research commercialisation and genomics research.
The budget committed an additional $1.2 billion to Australia’s Medical Research Investment Plan, on top of the existing $1.5 billion investment.
Again, the Liberal Party hasn’t made any promises about R&D tax incentives, or the ongoing review into the scheme, if it is re-elected.
Labor also hasn’t focused on the R&D tax incentive in its proposed policies, although it has said it plans to further exempt startups from cuts to the scheme.
However, the opposition has promised to “end the war on science and research”, and to improve the relationship between the Australian government and the research community.
Labor has pledged to boost R&D to 3% of GDP per year by 2030, and to establish a Prime Minister’s Science and Innovation Council.
While this is not startup-specific, the council will provide advice on the implications of new technology and research, and advise on the strategic approach the government takes to technology, engineering, mathematics and innovation.
According to recent StartupSmart research, people in the ecosystem are notably concerned about climate change. While the Morrison government isn’t famously hot on renewables, Liberal policies do pledge a few targets intended to move the dial, and this could include support for startups working in this space.
The Liberal government intends to have a third of Australia’s electricity coming from renewables by the early-2020s, and it’s putting money into projects that can help make that happen.
The Clean Energy Finance Corporation will receive $6.4 billion to fund 110 projects.
The Australian Renewable Energy Agency will also receive $1.35 billion, for renewable energy projects including energy storage, integrating renewables into the grid, and exporting for renewable hydrogen.
Elsewhere, a $20 million Product Stewardship Investment fund will be set up to accelerate work on recycling schemes, and $20 million will be invested through the Cooperative Research Centres Projects (CRC-P) for innovative solutions for recycling plastic and managing waste.
Labor has gone a step further, pledging 50% of electricity will come from renewable energy by 2030, as well as targeting pollution reduction of 45%, and net zero pollution by 2050.
It is also promising to double investment into the CEFC, adding $10 billion to support new electricity generation and storage solutions, and the transformation and growth of new industries.
Labor has committed $60 million to a National Recycling Fund, including funding for innovative waste solutions, as well as $100 million to marine science and a $10 million boost for the CSIRO Climate Science Centre.
Finally, Labor is pushing for more uptake in electric vehicle sales, offering $200 million to roll out charging infrastructure, and targeting 50% of new car sales by 2030.
Finally, the Liberal Party has made a passing nod to women in startups, promising $3.6 million to a Future of Female Entrepreneurs program, and $18 million to a Boosting Female Founders startup fund.
Morrison has also said the re-elected government will invest $1.8 million to extend the Science in Australia Gender Equity (SAGE) to improve gender equality in higher education and research institutions.
Labor is planning to create a National Evaluation Framework for Girls and Women in STEM Initiatives, and also to further fund the SAGE program.
Shorten also plans to establish a national Women in Science Day.
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