Tech startups: Now is your chance to shape policy



This guest article is by Senator Kate Lundy – Minister Assisting for Digital Economy, Industry and Innovation.

opinion A key priority in my roles in the Innovation and Digital Economy portfolios is to boost the prospects of technology start-ups in Australia. New companies create new jobs and that’s what Australia needs. Technology start-ups are the way great ideas become great businesses.

It’s new technologies and new business models that will help transform our economy: to make the most of the digital age, where digital technologies are central to businesses processes and access to markets in every sector.

Tech start-ups are built on the creativity and dedication of researchers and entrepreneurs. They are usually knowledge-intensive and globally oriented. Both attributes are central to the Rudd Labor Government’s vision for Australia’s future workforce and business growth opportunities. However, tech start-ups are also typically seen as high risk by investors.

Government has a role in setting the basic economic conditions and building the enabling infrastructure for future economic growth, the NBN. Beyond this, governments can help mitigate investor risk by removing unnecessary blockages in this critical part of the innovation landscape.

Mitigating innovation risk is the rationale behind the Government’s approach to research and development incentives, commercialisation support and our range of venture capital programs.
One of the main challenges facing start-ups is the shortage of capital during the often lengthy stage of getting from concept to market. One mechanism to acquire the technical and management expertise to make that transition is through employee share schemes, in which employees are offered shares rather than high salaries during the start-up phase.

Many people with start-up experience believe the current arrangements for taxing employee benefits gained from employee share schemes do not provide a practical incentive for them to take the risks required to bring innovations to market.

Earlier this month the Rudd Labor Government issued a discussion paper on the taxation of employee share schemes, titled Employee Share Schemes and Start-up Companies: Administrative and Taxation Arrangements. Copies and further information about the consultation can be found here. The closing date for submissions is 30 August.

This is the best opportunity for as long as I can remember to contribute to a formal process about how we provide the right practical and effective incentives for start-ups in Australia. If you are a current or potential entrepreneur or investor, I encourage you to make a contribution by making a submission.

The discussion paper presents a number of options and asks questions about current practice and future possible approaches. It also canvasses the taxation treatment of employee share schemes in other countries, where tax arrangements are considered to be more successful in encouraging innovative start-ups. Some of the most critical issues are the point of taxation, the complexity of valuing companies and the definition of start-ups.

What do you think we should do in this field to ensure Australia is innovative and competitive in new technologies and new industries?

Federal Labor has invested record amounts into tertiary education, research and development, research institutions and the growth of Australian businesses and opportunities.

With our investments here underpinned by the National Broadband Network, tech start-ups need to be a bigger part of our collective return on this investment. They create jobs and the innovations they bring to market help strengthen and transform every single sector of our economy, from the smallest home-based businesses to our largest mining corporations. See my video on employee share schemes.

Image credit: CeBIT Australia, Creative Commons