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Abbott's competitiveness agenda applauded, mostly

The federal government has released its National Industry Investment and Competitiveness Agenda, and one key industry group has described the development as a "step forward", but also called for more focus on computer coding in education.

The Australian government yesterday announced long-awaited reforms into how employee share options are taxed, in a bid to to make it easier for startups to attract and retain talent.

The $400 million Industry Innovation and Competitiveness Agenda, announced yesterday by Prime Minister Tony Abbott, will come into effect from 1 July 2015 after an industry consultation process.

Abbott said the government will reverse tax rule changes made under Labor in July 2009, that, according to Abbott, have discouraged Australian startups from providing employee stock ownership plans (ESOPs) to employees.

The old laws required a startup employee be taxed on the value of the share option when it is issued, before any payments are made.

Abbott also said there would be $200 million in tax incentives over four years for employee share ownership for companies with less than $50 million that are unlisted and younger than 10 years old.

“The Government will allow Employee Share Scheme options or shares that are provided at a small discount by eligible startup companies to not be subject to up-front taxation, so long as the shares or options are held by the employee for at least three years. Options under certain conditions will have taxation deferred until sale. Shares (issued at a small discount) will have that discount exempt from tax,” the government said in a statement.

In a statement today the association for ICT professionals, the Australian Computer Society, welcomed the focus on technology skills in Australian Government’s National Industry Investment and Competitiveness Agenda and its commitment to increased innovation as a significant step forward.

However, the ACS has renewed its calls for increased digital literacy programs for SMEs and a broader commitment from Government towards mandating computer coding as a foundation skill in education.

ACS CEO Alan Patterson said the Competitiveness report reinforces the clear link between a digitally skilled workforce and Australia’s global economic success, and features three key reforms that are critical to the development of such a workforce:

  • The promotion of STEM subjects in schools
  • The introduction of a ‘Coding across the curriculum’ programme to enhance computer programming skills across the curriculum
  • The Government’s focus on the VET system on meeting industry needs

In a statement Patterson applauded the report but said it lacks focus on digital literacy for small and medium enterprises, which the ACS has been calling for to help improve our economic performance.

“SMEs are the backbone of our economy and key to many of our future global endeavours,” he said. “Small and medium businesses need practical advice and assistance to understand both their workforce needs, particularly around ICT skills, as well as understanding what digital technologies can do for business growth and productivity and how they can build these technologies into their businesses.

“As recommended in our Innovation submission, SMEs need to embrace ICT products and services as critical elements of the business that drives innovation and builds competitive advantage. We would like to see Government to help increase this awareness with more facilitative programs to educate SMEs about ICT tools and the importance of having an online presence. We need a vastly improved national broadband infrastructure capable of supporting SME growth.

“SME leaders and entrepreneurs, including high-growth start-up CEO’s also need to have ‘work ready’ tech skills – in other words, they need to be able to walk into a meeting and give a presentation, or deal face to face with a client on a technical topic with a working understanding of that topic.

“The Government’s focus on VET is incredibly important to ensuring we have an appropriately skilled workforce. However, we need more focus on skills and competencies, particularly ICT competencies, rather than just a traditional focus on qualifications and occupations.

“We commend Government for their focus on STEM in schools but the ACS would like to see more focus on technology. Whilst mathematics is hugely important, particularly for coding, we also need to think about the here and now. We need more people to better understand technology and how to apply it in the short term,” he said.

Whilst commending the coding in schools initiative, the ACS also called for further attention to digital literacy programs for teachers as well as students.

“The $3.5m funding initiative for coding is most welcome, it’s a powerful step in the right direction, however much more needs to be done,” Patterson said. “We must recognise basic coding as a foundation skill and build it into the national curriculum.

"This needs to start at a young age, so that our students are better prepared and equipped to compete globally, as other countries such as the UK have these programs in place.

“With a focus on technology for students in schools means we need better professional development for teachers in the technology space. The ACS argued for this in our submission to the review, and stands ready to assist the Government in providing this additional training.

“The ACS is a firm supporter of Australia’s need for employee share option regulations to encourage start-ups, as the UK does. We need to redeploy inefficient innovation funding models with tax incentives for angel investment in Australian start-ups and Australian intellectual property creation (with benefits contingent on IP remaining in Australia).

“ICT is uniquely dynamic – and will remain that way for the foreseeable future. Many of today’s young people will work in jobs nobody has even heard of today. This requires a lifelong approach to skills and education in the technology area. Reskilling and retraining may be important for those who are seeking new opportunities at home or abroad.

“To provide an appropriate pipeline of skilled workers, we urgently need to reverse the declining trend of people choosing to study ICT. This will require a mix of changing the misconceptions and attitudes as to what a career as an ICT professional can offer, plus greater collaboration between the training and education sectors, employers, and the professional body to ensure our ICT skills base matches economy needs.

“In the longer term we must develop a long-term employment plan for Australia, which maps our human capital and the extent to which it matches our economic and skills needs.

“The ACS applauds Government for identifying innovation as a key ambition but we maintain the appointment of a Chief Innovator is key to our achievements in this area. As highlighted in our Innovation Submission, having an empowered role dedicated solely to innovation – similar to that of the Chief Scientist – would allow for the comprehensive development of an Innovation System and the successful implementation of many recommendations in the report. This would need to be based on joined-up and cohesive policies and programs, which are properly resourced and targeted. It needs to be someone who is not shackled by bureaucratic processes and can make recommendations directly to the Prime Minister.

“The ACS also welcomes the roundtable discussions being initiated by the Government on the Competitiveness agenda and we look forward to participating in them,” Patterson said.

Other industry groups have weighed in, including StartupAUS, and taxi booking startup Ingogo. For those reactions see the next page.


Peter Bradd, StartupAUS board member and entrepreneur-in-residence at Fusion Labs said: “Since the launch of the Crossroads report we have engaged with a number of government representatives, lobbying for change on behalf of StartupAUS and the broader Australian startup community. What we found is that there is a genuine willingness in government to look at how we can level the playing field for Australian startups.

“The fact that the hugely damaging regulations around ESOPs for startups are finally being changed is hugely positive, and the Government should be rightly commended for doing so. The Governments move to streamline and improve the visa process is also a very positive move, as Australian tech startups are without exception unable to recruit enough skilled ICT workers.

“However, the Competiveness Agenda is but the first step of many. There is still a huge amount of work to be done, but this hopefully signals that we are on the right track.”

StartupAUS also welcomed changes that would help foster increased venture capital investment into Australian tech startups such as a commitment to create a regulatory framework for crowd-funding.

Dr Jana Matthews, StartupAUS Board Member, ANZ Chair for Business Growth and Director of the UniSA Centre for Business Growth said: “While anecdotal evidence and recent funding news would suggest that there are rising levels of venture capital being invested into startups, the reality is that Australia still lags behind other developed nations, including our regional neighbours such as South Korea, Singapore and New Zealand.

“We welcome any moves by the government to foster investment in startups – and hope that an effective Entrepreneurs Investment Program grant scheme is next on the government agenda.”

StartupAUS also backs any move by the government to increase focus and resourcing for promoting STEM (science, technology, engineering and mathematics) subjects in school while expressing some concern that the proposed new digital technologies curriculum for K-10 may not be retained.

Alan Noble, StartupAUS board member and Director of Engineering, Google Australia commented: “It is encouraging to see the government recognise the importance of a tech-savvy and technically educated workforce as essential to Australia’s future. Capitalising on the digital economy will only be possible if we have people with the ICT skills necessary to develop products that can compete globally.

“As studies show the best way of increasing participation in computer science is to start young, and we hope that the focus on STEM subjects is brought forward to its logical conclusion – which is to have skills like computational thinking and coding being introduced at primary school level as outlined in the new Digital Technologies Curriculum.”

Hamish Petrie, founder and MD of ingogo has also commented: “The change to employee share schemes will remove a huge headache from Aussie start-ups. Under the old structure we've had to spend a ton of money on legal and accounting fees to put a legal scheme in place for our employees. And it's not just the money, it's the management time that was basically being wasted on red tape. Having logical regulations in place will mean start-ups and early stage companies like ingogo can use more time and resources to build new products and drive more growth.

“Our international competitors in other markets haven't have to grapple with this wasted time and energy. If Australia is serious about competing globally against other countries in this space, we need to get rid of these kind of barriers.”

Melbourne-based emoloyee culture startup CultureAmp also weighed in.

"We were heartened to finally see this very unhelpful policy reversed," said people geek Jason McPherson."It has previously helped some companies we know decide on moving overseas and it has acted as an impediment to us in a few ways. It has resulted in significant costs to our business at times already. It is still unclear how it might apply to companies who have already begun schemes or found ways to try and deal with the problem prior to the new legislation though - so I'm eager to see some of the details as they emerge in that regards also.

"It's good to see at least one Australian tax policy that might actually benefit innovative activity instead of investor-aided tax avoidance and housing investors."

For more information on the Industry Innovation and Competitiveness Agenda see the government's dedicated website. More information on the ACS is available at its website.

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