Australia’s startups are looking for help in tomorrow’s budget, with improvements to the investment environment, regulatory clarity and tax assistance topping the sector’s wishlist.
Last year’s budget saw $393.4 million pledged to an Industry Growth Program to help startups and SMEs “commercialise their ideas and grow their operations”, but the sector this year is looking for moves to make it easier to secure investment in a still-anaemic fundraising environment.
Ryan Black, acting CEO of the Tech Council of Australia, told SmartCompany the number one request he hears from startups and small tech businesses for the budget is to help improve Australia’s fundraising situation. With the venture capital landscape coming off the soaring highs of the past few years and remaining stubbornly deflated, startups have seen a significant reduction in available investment.
While Black agreed the Tech Council does not want the federal government to “replace the private sector”, he said there are a number of things it can do to improve the private investment market.
Firstly, he said, the government can overhaul the foreign investment review process. Foreign investors contribute half of total venture capital investment in Australia, but report a much more challenging review process than in the US and UK. In its pre-budget submission, the Tech Council suggested the federal government can make short-term process improvements like waiving fees for smaller firms and making better use of data.
In early May, Treasurer Jim Chalmers announced plans to “streamline” the foreign investment review process by accelerating approvals for known investors not working in high-risk, sensitive sectors. Black said these reforms were a “positive step forward” but that more can be done, like introducing automatic investment approvals in industries of national priority.
In terms of funding assistance and targeted deployment of public spending, the Tech Council is encouraging the government to expand the Business Research and Innovation Initiative (BRII). Currently, startups can apply for grants of up to $100,000 to demonstrate their solutions to government proposals. However, citing the success of similar procurement-like, challenge-style programs in the US and UK, the Council believes it should be expanded.
“We do want to see a lift in funding for that program in particular,” Black said. “It has sat at a fairly low funding level since it was established, and we think now is the time to really expand that program and make it something more meaningful.”
Some specific sectors of the startup ecosystem are looking for more targeted support. For example, FinTech Australia, the peak body representing over 400 Australian fintech businesses and startups, is calling for a renewal of the Fintech Trade and Investment Program, a $9.6 million initiative led by Austrade which helps businesses get their products and platforms into foreign markets and attract external investment.
Government support for AI development is also a major focus. With the number of AI companies in Australia growing an average of 7.7% per year, according to CSIRO figures, there is an interest among local startups in achieving regulatory clarity for their sector. The federal government and various agencies like ASIC have signalled ongoing interest in taking a “risk-based” approach to regulation amid the global AI boom, but few major changes have been made to date.
While last year’s budget included a five-year, $101.2 million commitment to support small businesses integrating AI and quantum technology, the attitude this year is geared towards ensuring the regulatory infrastructure is fit for purpose and enables local AI startups to compete globally.
In its submission, the Tech Council said it generally supported the government’s AI regulation approach, particularly as it relates to putting guardrails on development and deployment in high-risk settings while arguing it should take an “informed, coordinated, and consistent” strategy that would encourage AI development and adoption in Australia”.
“Something we’re really hearing from the startup side of the market is they want to see more focus on driving the growth of AI capability here in Australia as well,” Black said.
“That means – beyond the regulatory aspects of AI – how we can drive investment, how do we build the skills base, and how do we ensure we’ve got the right infrastructure?”
Some budget wishlist requests from startups mirror long-held desires from SME leaders. One software startup founder speaking to SmartCompany said the biggest thing the federal government could do to support the local ecosystem would be to increase the instant asset tax write-off threshold.
This position is supported by the Council of Small Business Australia (COSBOA), which argued in its pre-budget submission for an increase in the threshold to $150,000 for eligible depreciable assets, with the turnover threshold to be increased to $50 million.
To see SmartCompany‘s full budget coverage, click here.
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