Tech startups receive support in Federal Budget 2020


10th November, 2020

How did tech startups fare in the 2020 Federal Budget?

Tech startups were among the 2020 Federal Budget winners, with support for the advancement of science and technology marked as a crucial element of the Government’s economic recovery plan.

Small-to-medium enterprises (SMEs) were given some much-needed hope in this year’s Budget, with the Treasurer announcing a series of significant support measures for the sector designed to fast track their way to the other side of the current economic recession.

In particular, the Budget extended several lifelines to the technology startup ecosystem, including the injection of additional funds into existing government incentives, and the introduction of new grant programs as well.

Key takeaways:

  1. Controversial plans for clawbacks and caps on the R&D Tax Incentive scrapped
  2. Significant Government investment into clean-tech, recycling and ag-tech research
  3. Competitive manufacturing grant program will open before 2021, with up to $1 million in grants available to SMEs
  4. Funds injected into the simplification of the Foreign Investment Review Board process

Cloud of R&D anxiety finally lifted

Most notably for tech startups, Treasurer Frydenberg put the minds and hearts of tech startup founders at ease after announcing the Government’s intentions to abandon its proposed controversial changes to the R&D Tax Incentive.

The changes, which were suggested back in the 2018 Budget, sought to reduce the tax offset available to all businesses claiming the incentive, and proposed to introduce a cap on cash rebates available to small businesses.

More recently, the Government floated the idea of retrospectively applying some of the proposed changes, warning that if confirmed, startups could be faced with mandated clawback payments.

After receiving heavy backlash from startups and ecosystem activists, the Treasury scrapped the changes on Budget night and doubled-down on the incentive by giving it a $2 billion boost, a move that has already sailed through both houses of parliament.

$1.9 billion investment into clean tech

Research into sustainable practices, including clean energy, recycling and improved agribusiness was identified as a priority in the Budget, with large sums of funds allocated to low emission and waste recycling initiatives, and additional funding given to research organisations like ARENA and the CSIRO.

With many local startups working in clean-tech, recycling and ag-tech, the news of increased funding to encourage research into these verticals was a promising feature of this year’s Budget and was welcomed by the SMEs working in those sectors.

Manufacturing Modernisation Fund locked in for round two

There was some additional good news for startups working in the manufacturing space, with the Government committing $52.8 million to a second round of the Manufacturing Modernisation Fund (MMF).

The Government will use the MMF to co-fund manufacturing projects that are geared towards transforming businesses through technology upgrades, as well as projects that focus on the uptake and training of new employees.

Round two of this competitive program is expected to open before the end of 2020, and will offer co-funded grants of up to $1 million to support approximately 150 SMEs working on attractive projects within the identified priority industries, including:

  1. Resources technology and critical minerals processing
  2. Food and beverage
  3. Medical products
  4. Recycling and clean energy
  5. Defence
  6. Space

This fund is part of the Government’s broader Manufacturing Strategy, which will see close to $1.5 billion injected into the sector with an aim to harness Australia’s manufacturing capabilities, increase competitiveness, build scale and enhance the country’s future resilience.

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Foreign investment process simplified

Most early-stage tech startups rely heavily on equity or debt investment to build their businesses, and with trends demonstrating a decline in local early stage startup investment, it is more important than ever for startups to easily turn to foreign investors.

Historically, international investors have needed to go through the Foreign Investment Review Board (FIRB) process, which is notoriously complex and often deters would-be investors from dabbling in the Australian investment market.

As part of this year’s Federal Budget, the Treasurer announced that his Government will commit $86.3 million to simplify the FIRB process through the development of a new online platform designed to streamline the application protocol and the creation of a consolidated Register of Foreign Ownership of Australian assets.

While things are certainly looking tough for all businesses at the moment, it appears that tech startups have been considered in this year’s Budget. How much of an impact the support will have? Only time will tell.

Looking to turn your own dream into reality? Get ready and get set with MYOB’s Start Up Guide today.