Monday, 08 May 2017 06:32

Tech start-ups hope for tax, investment relief in budget

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Tech start-ups are hoping for changes in Tuesday's federal budget that will reduce their tax burden and make access to investment easier so that their sector can grow and thrive.

The Coalition government has made jobs and growth its mantra for a long time and thus it is not surprising that small businesses, which form the majority of Australian firms, are hoping for encouragement as they look to expand and consolidate.

Grant Shankster, co-founder of MiSale, said previous budgets had recognised the need to invest in the start-up space, adding that it would be great to see continued investment in this area.

"We start-ups are Australia’s future, after all, said Shankster whose company provides a real estate platform that puts the buying and selling of homes into the individual's hand.

"However, I’d like to see more than investor tax breaks and new laws around crowd funding introduced. It would be great if the budget recognised the need for start-ups to access funding quickly, working alongside start-ups to deliver on ‘first to market’ ideas and products.

Shankster said most start-ups faced problems in identifying and securing funding.

"Like much of government funding there’s a great deal of bureaucracy and red tape to cut through before you have access," he said. "Start-up culture is all about being lean and agile.

"It’s hard to apply funding when you’re unaware of the benefit of such schemes and the process to secure funding is achingly complicated and often locked behind different acts or tedious tender processes. This ultimately leaves start-ups looking for aid in the private sector away from government or worse, self-funding and declaring bankruptcy before truly getting their idea off the ground."

Jeff McAlister, the chief executive of TryBooking, said: "As an online company we are able to create overseas companies and launch without a local presence quite easily. The current system of taxation means that we would pay tax in Australia on overseas profits before they are remitted to Australia (in the absence of a deferred tax asset). This area needs to be reformed to encourage local companies to expand overseas while keeping jobs in Australia."

TryBooking handles ticketing and registration and McAlister said start-ups needed to experiment with several business models in order to find one that fit a market need and was also scalable.

"Currently, under the 'same business' test, the tax losses incurred through the first business models are not deductible - if they were deductible it would give further incentive for investors to fund the new business models," he said.

"Reform is needed to the fringe benefit tax system as it is one of the complicated parts of the tax system - higher thresholds for employee FBT amounts provided to each employee would also be of assistance."

Tony Wu, the head of growth at Weploy, an online platform that connects businesses looking for short-term support staff with prospective employees, said SMBs were the future of Australia's prosperity and if "we want to drive economic growth, then we need to be investing in and better supporting these companies by making it easier for them to grow and succeed".

"I would like to see incentives that assist young companies in making their first hires and building a team. So many SMBs have amazing ideas and potential, but fail because they lack the capital to invest in staff. A subsidy or tax offset to support new hires would provide much-needed relief for businesses struggling with growing pains."

Wu said more money needed to be invested in innovation. "The amount of capital in the Australian start-up ecosystem is not enough to support the growth of an industry that will drive the future of our economy," he said. "We need to introduce more tax breaks and incentives to attract more investors and allocate more budget to supporting start-ups.

"For example the Victorian Government recently allocated $90 million to drive tech innovation. This is a great step forward. However, realistically, it will only be able to support a handful of start-ups. If we want to be global contenders, we need to be more aggressive and have access to global budgets."

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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