Federal budget 2015: Tax changes welcome… but government still doesn’t get start-ups

Australian tech start-ups have welcomed a suite of employment and tax tweaks in the federal budget, but warned the Australian government is still failing to understand high-growth technology companies.

Start-up founders have praised initiatives such as a $254 Digital Transformation package that included changing the previously untenable employee shares taxation scheme, establishing clearer crowdsourced equity funding framework and company tax cuts for businesses making less than $2 million a year.

Matt Bullock, founder and chief executive of online payment start-up eWAY said the changes would encourage productivity and growth.

“Helping business start up is a great thing for everyone. It’s a win for entrepreneurs, employees, consumers, and the entire community. It’s a tough decision to start a business, and it’s great to see a renewed focus on those who are willing to take a risk,” he said.

“The Australian government seems to misunderstand the distinction between small business and start-ups,” Nitro chief executive Sam Chandler told Fairfax Media.

Crowdsourced equity was mentioned for the first time in a budget on Tuesday night, and while the policy details have not been revealed yet, many in the notoriously investment-starved community are excited about being able to access retail investors.

Doug Morris, general manager of share portfolio management software Sharesight, said it was reassuring to finally see the Australian government on the front foot with crowdsourced equity.

“The announcement of an ASIC-led crowdsourcing framework is a big step forward for Australia. This should provide access to capital for thousands of start-ups by the very people they count as clients,” he said.

Chief executive of fledgling platform VentureCrowd Jeremy Colless, meanwhile said the commitment to developing the regulatory environment around crowdsourced equity would have a significant flow-on effect of more capital for promising but cash-starved companies.

“Allowing retail investors to gain equity in start-ups through crowdfunding has the potential to massively boost private sector funding for Australian innovation,” he said.

A LACK OF DIRECTION

The budget also included a measure that enabled small businesses and start-ups to claim instant tax-back concessions for business purchases worth less than $20,000 and removed fringe benefits taxes on the key tools of tech start-ups: laptops, tablets and mobile phones.

Mark Randall, an executive at managed cloud hosting start-up Bulletproof said many budget changes were positive but he was concerned the package lacked a cogent strategic direction.

“When the other tax changes for SMEs are considered this budget is definitely a positive one for supporting start-ups, entrepreneurs, and the small business sector,” Mr. Randall said.

“There are some good individual initiatives but there seems to be a lack of joined up thinking in the budget this year.”

Sam Chandler, founder of document management software Nitro, went further in his criticism of the government’s new measures.

“The Australian government seems to misunderstand the distinction between small business and start-ups. Start-ups are high-growth entities with huge potential to scale internationally. Whereas, small businesses are more localised and have fewer employees. Both entities have different needs and to have one uniform policy is to do injustice to both,” he said.

Launched in 2007, Nitro now employs hundreds of people in San Francisco and Melbourne.

Mr. Chandler said the proposed small business measures would have negligible impact on rapidly growing start-ups, which can soar from minimal revenue to millions, and back, within months.

“In order to increase jobs, it’s necessary to support start-ups with tailored and helpful policies instead of generic ones that benefit a broader small business community,” Mr. Chandler said.

“While small business is important to the status quo, start-ups are important to our future.”