News & Analysis

2016 Budget sees Government focus on jobs and growth, but rehash previously announced initiatives for startups

- May 3, 2016 5 MIN READ
AA Bill

Five months after Malcolm Turnbull urged Australia to shift the economy’s focus from the resources sector to innovation with the launch of the National Innovation and Science Agenda (NISA), Treasurer Scott Morrison delivered a budget focused on jobs and growth.

“Australians know that our future depends on how well we continue to grow and shape our economy as we transition from the unprecedented mining investment boom to a stronger, more diverse, new economy,” Morrison said.

“They know that their future, their jobs and those of their children and grandchildren depend on it. This is a very sensitive time.”

However, for the startup sector the juiciest funding announcements have already come in the months since December.

While he announced tax breaks aimed at SMEs but which may also benefit startups, making unincorporated businesses turning over less than $5 million a year eligible for a tax discount of 8 percent, Morrison for the most part reiterated the government’s commitment to the NISA by highlighting previously-announced funding measures that it hopes will fuel its much-publicised ideas boom.

CEO of StartupAUS Alex McCauley said that, despite the jobs and growth rhetoric, there isn’t much for startups to get excited about in this budget.

“Since the announcement of the NISA six months ago, the government has been telling startups that the NISA was just the beginning. It has been describing the NISA as a platform from which it will be able to deliver bold, decisive action in this space. This budget was a missed opportunity to make good on that promise,” McCauley said.

“Startups didn’t expect any game-changing announcements in this budget; implementing the NISA agenda items is still the top priority. But it’s critical that we don’t lose sight of the importance of genuine high-growth technology companies as a critical driver of Australia’s emerging economy.”

This year’s Budget documents highlight initiatives such as the government’s Digital Marketplace, to be run through the Digital Transformation Office to make it easier for startups and SMEs to deliver digital services to government.

Also highlighted is the $230 million going towards the Cyber Security Strategy, launched in April, of which $38 million will be funding the development of a Cyber Security Growth Centre to further local innovation in the space.

Morrison also spoke of the government’s support for CSIRO, saying it will expand the CSIRO’s accelerator program “to support public research bodies get up to speed and achieve commercial success.”

This announcement too had been made earlier, with the government earmarking $100 million in funding for the CSIRO in its NISA launch in December. With $75 million to go to its Data61 arm, however, this amount still falls short of making up for the $110 million in funding CSIRO lost through the Abbott government’s budget cuts in previous years.

The Budget also brought attention to the government’s changes to legislation around Employee Share Schemes, which were adapted last year, as well as its upcoming – and much-debated – changes to equity crowdfunding regulations.

A previously-made funding announcement that perhaps fell through the cracks for much of Australia’s startup ecosystem, however, focused on innovation in the Defence sphere.

The Defence Industry Policy Statement, released earlier this year, stated that the “increasing pace of geopolitical, economic and technological change means it is critical that Defence ensure it has continued access to the best innovation Australia has to offer.”

The Statement acknowledged that, while startups and SMEs have a track record of producing some of the world’s most innovative defence technologies, they have found it difficult to engage with Defence due to complex entry processes and the “fragmented nature of innovation programs.”

As well as promising changes in culture and processes and the facilitating of introductions between industry and Defence, the Statement put aside $730 million for a Next Generation Technologies Fund over the decade to 2025-26, with funds to be invested in new technologies that have the potential to deliver “game-changing capabilities.” Also announced was $640 million over the same period for a Defence Innovation Hub, which will look to enable industry and Defence to collaborate on new ideas and technologies, from initial concept through to prototyping and testing to introduction into service.

Still, while the Budget hasn’t exactly given the startup community much of anything new to sink its teeth into, it can be buoyed by the government’s renewed focus on fintech and encouraging young people into work and self employment.

Drawing attention back its Fintech Statement, released in March, the government stated again it is keen to support innovative ideas in the fintech space to ensure Australia is a leading destination for fintech companies and global disruptors, with the government also looking to explore solutions to make its own processes more effective.

The Productivity Commission is investigating ways to improve data availability and use across the public and private sectors, while the government will also undertake a study into the costs and benefits of electronic invoicing by agencies; this has the potential to increase efficiency by 60 to 80 percent, saving up to $10 billion annually.

Looking to push young Australians into work, the government will provide $751.7 million over four years from 2016-17 to launch a Youth Jobs Path program for young job seekers under 25. This will include an internship placement program, providing up to 30,000 placements each year to help businesses and job seekers trial employment.

With Morrison calling this a real ‘work for the dole’ initiative, it will see job seekers given $200 a fortnight while businesses will receive $1,000 up front to host an intern for a period of up to 12 weeks.

Phil Morle, cofounder of Pollenizer, welcomed the initiative, saying that startups need help and can be the new ‘trades’ that teach young people entrepreneurship.

“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,” he said.

The government will also be providing additional funding for its New Enterprise Incentive Scheme, adding an extra 2,300 places to bring the total up to 8,600. The scheme provides eligible job seekers with small business accredited training, mentoring, and business advice for up to a year.

The effect on startups of other iniatives announced tonight will have to wait to be seen.

Klaus Bartosch of Queensland startup 1st Available, for example, urged fellow founders to look beyond the tax cuts and previous funding announcements and instead dig into the Budget to find out what may apply specifically to them in funding packages they may not have thought to look into.

“Look at the huge amount of money provided for dental service subsidies, $5 billion. That will provide a huge opportunity for 1st Available and other technology companies who work with the healthcare industry, doing everything from digitising the appointment process and patient records to creating new telehealth solutions like remote surgery. Startup companies should be looking at the huge opportunities like this instead of nitpicking over handouts and perks,” Bartosch said.

Another announcement that may have an effect is the so-called ‘Google Tax’, which will see $679 million given to the Australian Taxation Office for the establishment of a Tax Avoidance Taskforce.

The Taskforce will be charged with enhancing the ATO’s audit and compliance activities targeting multinationals, large corporates, and high net worth individuals, in other words making it harder for companies – such as Google – to avoid paying tax on income earned in Australia.

“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 have given my money to the now-bankrupt Quickflix,” Morle said.

Of course, the actual implementation and delivery of all the measures announced tonight – and indeed in the National Innovation and Science Agenda itself – rest on the result of the upcoming Federal Election, expected to be held in July.

Despite the focus on jobs and growth and how the ideas boom can make it all happen, the wider community’s reaction to the $28 million ad campaign spruiking innovation shows the government has a lot to do to convince mainstream Australia to buy in.

Image: Treasurer Scott Morrison. Source: abc.net.au.