A group of technology companies born in Australia have joined forces to demand the federal government to listen to their concerns surrounding the country’s startup ecosystem.
In a letter, addressed to Prime Minister Scott Morrison, signed off by Airwallex, Atlassian, Canva, Culture Amp, Deputy, Freelancer, LiveTiles, NextDC, Pet Circle, Prospa, Redbubble, Rokt, SafetyCulture, and StartupAus, the group has asked for a greater level of engagement with the government in relation to policy settings that may “aid the recovery and growth of Australia’s fragile startup ecosystem and tech economy” in light of the global impacts of the coronavirus pandemic.
Of particular concern to the 14 companies are the proposed Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 and the associated amendments to the R&D tax incentive currently under consideration by the Senate Economics Legislation Committee.
“Cutting R&D makes no sense, especially while the government is looking for ways to rebuild our economy. The technology industry is a fast-track to Australia’s post-pandemic recovery. It’s a massive force multiplier for jobs and already makes up 6% of our GDP, a number which could be much higher,” Scott Farquhar, co-founder and CEO of the now Silicon Valley-based, Nasdaq-listed, and UK-domiciled Atlassian said.
“Doubling down on our investment in innovation now will reward our nation 10-fold into the future.”
The committee in February last year asked the R&D Bill be taken back to the drawing board, saying at the time it recognised the need for government to maintain public confidence in the integrity and financial sustainability of the R&D tax incentive, but that it was not confident the introduced measures would provide exactly that.
The Bill remains mostly unchanged.
With a long list of companies and organisations begging the government to pull the Bill, or to at least listen to their views on how to make it practical, the Department of Industry, Science, Energy and Resources admitted in June it has not held consultations with the industry since it was asked to refine the Bill and that it is keen to push forward with the Bill as it stands, as “concerns have been noted”.
In its letter, the group said that while they appreciate the Bill was born in a different time to achieve different objectives, its members strongly oppose it today, “not only for what it contains but for what it is lacking — measures to actively support and stimulate R&D activity in Australia at a critical juncture as the innovation and tech sector seeks to recover from the global impacts of COVID”.
“Now is not the time to reduce the level of government support for R&D in Australia, which already lags behind peer OECD nations in this respect. Rather, the existing RDTI mechanism is an ideal vehicle by which to deliver much needed stimulus directly to the innovation economy,” they wrote.
As echoed in submissions to the committee from both Atlassian and Canva, the letter says there are specific concerns with the Bill’s cost-cutting provisions, such as the imposition of a new cap on refundable amounts at a time when it said many small to medium sized-enterprises are struggling to survive and retain staff.
The group also suggested the government in the short-term institute a temporary moratorium on claw-backs; pay quarterly refunds in advance of the tax cycle; and provide a one-time stimulus to eligible small entities using the R&D tax incentive as a vehicle.
Calls for software development to qualify under the scheme were also reiterated, in addition to calls for medium-term changes, including for the R&D tax incentive program to be amended to specifically address the technology sector’s concerns around qualifying software development activities, or the creation of a new program to encompass these activities and increase the level of support available within the program.
“While these unprecedented times present many challenges for the tech sector, as global economies and corporate spending contract, we firmly believe that with appropriate support and incentives, this sector will be key to a strong and enduring Australian economic recovery, driven by innovation and technology in all its guises,” the group wrote.
“In fact, we view the current crisis as a ripe opportunity for Australia to redouble investment in a digital economy and its future prosperity.”