3rd May, 2021
With the 2021 Federal Budget Night just around the corner, tech startups are eager to see what this year’s announcements will have in store for their businesses. Here’s what we know so far.
As the Australian economy continues along the road to recovery following the containment of COVID-19, discussions around the contents of this year’s Federal Budget are already underway, with startups hoping for at least some of the Budget announcements to fall in their favour.
Startups have been on the receiving end of mixed Budget outcomes in recent years, with the most recent budget containing historic measures of small business support in the wake of the COVID-19 pandemic.
Here’s an overview of how the Federal Budget has impacted startups in the few financial years preceding the pandemic, what was different about last year’s Budget, and how things appear to be shaping up for small businesses this time round.
In 2018 and 2019 Federal Budget releases, the government took several key steps to offer support to startups, including rolling extensions and increases to the Instant Asset Write-Off scheme, cuts to personal income tax rates and funding increases to the Export Market Development Grant.
Tech businesses were also subjected to proposed cuts to the Research & Development Tax Incentive, with the government putting forward its plans to scale back its flagship innovation incentive.
Startups featured strongly on last year’s historic Budget Night, with the Treasurer announcing a series of unprecedented measures geared towards putting SMEs and startups back on track and on the road to recovery.
More specifically, startups were positively impacted by major Budget announcements across four different areas, as follows.
Treasurer Frydenberg announced that the value cap for assets purchased under the Instant-Asset-Write-Off scheme would be increased from $30,000 to $150,000 until 31 December 2020, and subsequently reduced to $1,000 for assets purchased on the 1 January 2021 or later.
After years of proposed changes and controversy in the area, the Treasurer announced on Budget Night 2020 that all proposed cuts to the scheme would be scrapped, and additional funds would be injected into the scheme to encourage private sector investment into innovation.
“For small businesses with turnover less than $20 million, there will be an increase in refundable R&D tax offset and no cap on annual cash refunds, which will apply from 1 July 2021,” explained MYOB tax expert, Jacqueline Lim.
$800 million in funding to support SMEs with their transition into conducting business online was announced in last year’s budget, which Lim indicates is a big part of the government’s strategy to shift our economy into a more digital future.
“This is part of the digital business plan, where the goal is for Australia to become a leading digital economy by 2030,” she said.
The Treasurer also announced that an investment of $1.3 billion would be placed into manufacturing initiatives aimed at supporting businesses working within what the government had identified as the growth industries most likely to stimulate the economy through their work.
Supriya Nair, founder of agtech and biodiversity startup OutofBox Solutions, referred to some of the measures taken by the government in last year’s Budget as “saviours” for the Australian startup ecosystem.
“While 2020 was a whirlwind, we appreciated the government support that allowed us to retain our core team and stay in business,” Nair told The Pulse.
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With Budget Night looming, startups already have their hopes set on the announcement of a series of additional support measures to bolster their recovery.
Co-founder of startup investment firm Rampersand Paul Naphtali shared his 2021 Federal Budget wish list with The Pulse, outlining what he believed should be prioritised on the Treasurer’s agenda for 11 May.
“[I] would love to see renewed commitment and expansion of the Research and Development Tax Incentive, expansion of the talent and investor visas, and further investment in education and re-skilling,” he said.
According to Nair from OutofBox Solutions, support in the form of grants that enable startups to take on local suppliers would be helpful too, as this would generate additional jobs and reduce shipping and turnaround times.
In most years, the weeks leading up to Budget Night see various pre-emptive announcements and media releases with Budget-related information beginning to surface. So far this year, several such statements have already dropped, with more expected in the coming week.
Most notably for startups, Prime Minister Scott Morrison has already indicated an extension to his government’s $800 million digitisation strategy could certainly be expected to feature as part of the 2021 Federal Budget.
The Prime Minister said in his address to the Business Council of Australia that COVID-19 had highlighted the role digital technologies can play to improve operations in both the private and public sector and confirmed that this year’s Budget would see additional measures taken to enable digitisation, InnovationAus reported.
“We are delivering on our strategy to make Australia a leading digital economy and society by 2030,” said Morrison.
The Prime Minister also announced during his Business Council address that a $120 million Deregulation package could be expected to feature in this year’s Budget as well, with a focus on decreasing the red tape associated with economic growth, SmartCompany reported.
“We are determined to take unnecessary regulatory burdens off business, off employers, to unlock investment and to create jobs,” said Morrison.
According to SmartCompany, small businesses can potentially benefit from the Deregulation Package, part of which is expected to be devoted to the government’s Business Research and Innovation Initiative — a competitive grant scheme offering funding to businesses that can create innovative solutions to pre-defined government issues.
In his latest announcement about support measures that can be expected to feature on Budget Night, the Prime Minister confirmed that his government would be investing $539.23 million in low-emission technologies, SmartCompany reported.
The funding is set to be divided into two focus areas, one of which being the development of four additional clean hydrogen hubs, and the other to fund the development of carbon capture and use and storage projects.
The latter will see the injection of $263.7 million into science and entrepreneurialism, a promising sign for startups in the energy sector.
According to Minister for Energy and Emissions Reduction Angus Taylor, the funding “will reduce technical and commercial barriers” to the deployment of such technologies.
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