Organisations call for start-up friendly enhancements to R&D tax incentive

Organisations call for start-up friendly enhancements to R&D tax incentive

Start-up associations propose a series of key recommendations to the Federal Government review.

Alex McCauley - CEO, StartupAUS

Alex McCauley - CEO, StartupAUS

An alliance of start-up organisations are rallying for start-up-friendly improvements to the R&D tax incentive scheme with a submission of key recommendations proposed to the Federal Government.

The R&D tax incentive is said to be the largest component of Australian government support for innovation, with around 13,700 entities undertaking $19.5 billion of R&D, at an estimated cost to government of $2.95 billion in 2013-14.

Prepared by StartupAUS and supported by FinTech Australia, StartupWA, StartupTas, TechSydney, Startup Adelaide, and Startup Victoria, it proposes a series of key recommendations that would see the scheme enhance its investment in innovative, high-growth businesses.

Data from StartupAUS’ survey conducted in October 2016 on a nationally representative sample of 74 start-ups found that 98.7 per cent of respondents said they would spend any increase they received in the R&D tax incentive on hiring additional staff.

Of these, 82 per cent said they would hire additional staff to conduct further R&D.

StartupAUS CEO, Alex McCauley, said the R&D tax incentive is most effective when directed to start-ups.

“When the R&D tax incentive is spent on start-ups, three critical goals are achieved," he said.

“Start-ups are supported when they are at their most vulnerable, R&D output gets a big direct boost, and our fastest growing tech companies are encouraged to stay and create jobs in Australia.

"In short - you get a lot of bang for your buck when the R&D tax incentive goes to start-ups."

McCauley also acknowledged how effective the scheme was in supporting early stage businesses.

“Access to capital is the single biggest challenge facing early stage businesses, and the R&D tax incentive is one of the biggest levers available to government to provide support," he added.

“Our research shows that 89 per cent of start-ups say R&D tax incentive is either critical or very important to their business, while 87.8 per cent of start-ups say that receiving the R&D tax incentive quarterly rather than annually would make a huge or very large difference."

Consequently, the associations' recommendations include an increase the amount paid to start-ups - even very substantial increases to the amount claimable by early stage tech start-ups (doubling it, from 45 per cent to 90 per cent) would only cost $90 million in a scheme that, in total, costs more than $3 billion each year.

StartupAUS believes this part of the scheme delivers the most value, and suggests giving it a significant boost.

In addition, recommendations include better cashflow rates, alongside simplifying the application process for the R&D tax incentive while extending collaboration incentives to larger enterprises.

"The vast majority of Australian start-ups claim the R&D tax incentive," McCauley added.

"The capital provided under the incentive for early-stage and growing businesses is a lifeline to many startups that can literally make the difference between growth and failure for a promising venture."

The Federal Government’s public submission process is open until October 28.

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Tags federal governmentstart-upfundingR&D Tax IncentiveStartupAUS


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