Budget 2015: Analysts give "thumbs up" to strategic IT investment

Budget 2015: Analysts give "thumbs up" to strategic IT investment

Investment in government and small business a boon for IT industry

Analysts have welcomed Joe Hockey's second budget as a shot in the arm to IT investment - particularly around Government agencies.

The positive sentiment is in response to a raft of investments in the government sector and initiatives to spur small business spending.

The government has earmarked $254.7 million to commence its digital transformation.

This includes $106.8 million for streamlining government grants administration,$33.3 million for the development of a trusted digital identity framework, $11.5 million for the enhancement of the “tell us once” service.

Other stage one initiatives include $7.1 million for the development of a whole-of-government digital mailbox solution development of a mandatory digital service standard, with costs to be met from within DTO core funding $153.8 million to defray the cost of additional data retention requirements.

There will also be an additional $1.7 million provided for oversight by the Office of the Australian Information Commissioner, $143 million for systems to support the National Disability Insurance Scheme, $130.9 million to enable the Tax Office to upgrade MyTax, to cater for more complex tax returns.

There is $33.7 million for a national gateway for career support, $32.4 million for streamlining business registration, $17.6 million for a new datacentre for the Australian Federal Police, $12.9 million for IT security enhancement for politicians, $12.2 million for a health organ matching system and $7.8 million to extend a trial for in-home telehealth for veterans

In a new initiative for startups, $7.8 million will go to crowd-sourced equity funding for public companies and $3.7 million to extend the trial for in-home telehealth for veterans

Ovum Analyst, Kevin Noonan, told ARN it was the first time in the 10 years of reviewing the budget he has actually said the the words "thumbs up".

"The reason for saying that is after a really lacklustre budget in 2014 and a series of commodity cost cutting budgets from both sides of politics for some years now we actually seeing strategic investment in IT," he said.

"It's not just about the money, it's about the fact that they are fixing some things that have been a known problem for many years, and they are also making some strategic investment.

In terms of fixing some of the big problems, Noonan said Centrelink could finally get started on replacing an "old 204 system" with a $60.5 million investment.

"The bureau of statistics was really on life support and their systems couldn't even support the national system going forward, so having a significant investment in business transformation in ABS, deals with ABS," he said.

"We also had the troubled personal electronic record system in health which now has some funding to sort it out.

Noonan said the budget also included a strengthening of national security with funding for the Australian Secret Intelligence Service, strengthening of Border Protection, which is the merged entity of immigration and and $10 million for analytics in health.

"So, if you look at all of those they are fixing some big long standing problems and setting a new baseline for good house keeping.

"But alongside that we have the new investment in strategic initiatives such as the Digital Transformation office and a bagful of initiatives that are coming out of the National Disability Insurance Scheme.

"In the past we used to be scraping around looking for IT as a headline amongst initiatives.

"It's interesting to note that in this particular budget IT is itself getting some clear billing and some strategy behind it."

Noonan said there were also challenges in the "good news" budget.

"The one here is after years of the IT industry living on bread and water, we now have this budgetary shock where there's money being invested in IT.

"The challenge will be for the IT industry including consultants and system integrators to start ramping up and investing in federal government again."

The $20,000 tax deduction for small business assets also has analysts postive about an increase in expenditure on IT.

Channel Dynamics director, Cam Wayland, said the last time a tax incentive was incentive introduced, under Wayne Swann, there was a reasonable uptick in the SMB sector.

"$20,000 is a good number. It makes sense when you start to think about what you could do in terms of $20,000 worth of infrastructure," he said.

"Think if some of things that are actually going on right now: Windows Server 2003 end of life.

"It's a perfect opportunity for resellers and vendors to start to put together some packages together to encourage those people to upgrade to an alternative."

"It's a fantastic opportunity for vendors and partners to start to put together a range of services and hardware offerings that make sense.

"I think from the channel's perspective the thing that will be the kicker is the $20,0000 write off, but it all helps.

Wayland said, overall, the budget was a step in the right direction after last year's negative budget.

"The rhetoric and comments around this budget is far more positive and the economy is a state of mind for more than anything else," he said.

"Last time it was a pretty negative time and that reflected into the politics and the political rhetoric at the time, then into the mood of the consumer and business and the economy," he said.

"This is the polar opposite of that. I am hoping this will also lift consumer and business confidence. Coupled with low interest rates, it is a good time to get up and get cracking."

Despite small business getting a strong lift, there was little for start-ups besides the much vaunted changes to employee share schemes and the $7.8 million crowdfunding initiative.

Director, RSM Bird Cameron, director, Stephen Carroll, said there was minimal content in the Budget that would have an impact on Australian innovation.

"The announcements will have some benefits for startup innovators," he said.

"For direct financial impact, the Crowd Sourced Equity could be a significant opportunity for start-up innovators to raise the critical early stage capital they require and that is very hard to raise currently in Australia," he said.

"This combined with the improvements to the employee share scheme provides a better environment for the early stage companies in Australia.

"The anticipated Tax White Paper is likely to contain more content covering the future direction of Australian innovation tax policy."

RSM Bird Cameron, Director - Tax Services, Con Paoliello, said the GST integrity measure or "Netflix tax" on digital goods sought to ensure that there was a level playing field for the suppliers of digital products and services in Australia in relation to the GST.

"The new Australian digital services GST was outlined in the May 12 budget with introduction from 1 July 2017," Paoliello said. "Prior to its enactment, it will require the unanimous agreement of the States and Territories.

"The measures are expected to be similar to the European Union rules on the supply of digital services to EU consumers introduced on January 1, 2015."

He said it was expected that the changes woudl compel non-Australian digital service providers (such as Netflix) to collect and remit GST to the Australian Federal Government.

"Mr Hockey has indicated that the funds raised – estimated at $350m over four years – will then be redistributed to State coffers. There has been no indication as to how the funds collected would be redistributed.

"As of 1 January 2015 in the European Union, business to non-registered customer” (“B2C”) supplies of telecommunications, broadcasting and other electronically supplied services provided by suppliers in the EU and made to non-taxable customers within the EU will be treated as supplied in the EU Member State where the recipient of the service is established, has a permanent address or usually resides.

He said if similar rules were introduced in Australia, suppliers of such services would need to determine where their customers were established.

They would also need to account for GST.

"This will be a requirement irrespective of where the supplier itself is established," he said

"No minimum thresholds apply in the EU version, so making supplies to just one customer in Australia may trigger a GST registration requirement in Australia if similar rules apply."

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Tags RSM Bird Cameronkevin noonandirectorCam WaylandOvum AnalystStephen CarrollChannel Dynamics director


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