The Federal Government has announced it is developing a Digital Economy White Paper to help shape policy to ensure Australia is well-placed to benefit from increasing “digital engagement” and “address the challenges in becoming a leading digital economy.”
It follows a forum held by Prime Minister Julia Gillard in October 2012, which brought together technology founders including Scott Farquhar and Mike Cannon-Brookes of Atlassian, and Michael Fox of Shoes of Prey, and could impact the Government’s policies affecting startup companies, in areas like the taxation of employee stock ownership plans (ESOPs) and venture capital.
A letter sent to participants by Minister for Broadband, Communications and the Digital Economy, Stephen Conroy, says one of the six areas likely to be covered by the white paper is the promotion of “digital innovation and a conducive regulatory environment to encourage innovation and investment in Australia’s digital economy.” In plain speak, it will be looking at the rules and regulations that affect startups.
In an open submission to the Minister, FLT argues the Government needs to improve taxation policy on ESOPs for startups, ensure the still shaky VC industry is supported, and provide greater incentives for maths, science and technology graduates. We think the top issues which need to be resolved to help startups now and in the coming years include:
- Incentivising staff with an improved ESOP tax regime
- Developing Australian technology and entrepreneurship skills
- Fixing the funding crunch to help more startups succeed
FLT hopes to see tax rules changed to make things it easier for startups to establish ESOP schemes. Only 57% startups say they have one, despite it being the simplest way to incentivise staff. It’s still expensive and complicated to establish an ESOP, due to the way the shares are taxed.
“Although research from the Global Entrepreneurship Monitor shows Australians are entrepreneurial in spirit — second only to the US — they are not provided the support needed to grow successful startups,” the FLT submission says.
“More than 10.5% of Australians are now involved in starting a business, but we don’t think ‘big’, because it’s so hard to grow big.”
According to a report by global consultants McKinsey & Company Australia experienced 0.7% annual decline in productivity between 2005 and 2011. The implications are quite significant, and the best way to improve productivity is by helping build a thriving startup ecosystem, and investing heavily in R&D. Our recent editorial on the Israeli startup sector shows how government support can help create a successful high-tech economy.
It’s concerning that there still hasn’t been a response to the Government’s review of venture capital and entrepreneurship, leaving the future of the successful Infrastructure Investment Fund (IIF) unclear.
At the time, Starfish Ventures Investment Principal John Dyson told FLT: “We’d love to see the continuation of the IIF program. I think for the Government to come out and make a bold statement it was committing to an ongoing investment would be good for confidence.”
While that might be the case, more needs to be done to bring the Australian venture capital industry to a standard where it is competitive globally. Data from the 2012 World Economic Forum Global Competitiveness Report puts Australia at 21st worldwide when it comes to the availability of venture capital.
It’s a big worry for startups, which face an increasing struggle to scale. The Silicon Beach startup report found that fewer than 5 percent of Australian companies were successfully scaling. It’s a problem only set to get worse, as it becomes cheaper and easier to start a company, yet remains difficult to scale.
While Sydney now ranks 12th out of cities worldwide, the ecosystem supporting startups (investors, incubators, accelerators, government programs and mentors) is still finding its feet. That’s why it’s so critical government sits up and plays its role in supporting innovation.
“Given our intention to release the white paper in the first half of 2013, there is a small window of opportunity to collect additional input from stakeholders,” said Conroy.
Submissions for the White Paper will close on Friday 11 January. You can provide your views by emailing SDD@pmc.gov.au. Feel free to use FLT’s submission as a template.
Trackbacks/Pingbacks