Amending Australia's Research and Development (R&D) Tax Incentive scheme to benefit startups will result in the government getting more "bang for its buck", according to StartupAUS CEO Alex McCauley.
McCauley's national non-profit startup body has joined forces with FinTech Australia, StartupWA, StartupTas, TechSydney, Startup Adelaide, and Startup Victoria to propose a series of recommendations to the federal government that would see its R&D Tax Incentive scheme enhance its investment in startups.
According to McCauley, the R&D Tax Incentive is most effective when directed to startups, and that it would result in more jobs and more local innovation.
He said that national research conducted by his organisation in support of the industry body's ideas found that 98.7 percent of startups surveyed indicated they would hire additional staff with increased income from the R&D Tax Incentive, of which 82.4 percent would be specifically in an R&D capacity.
"When the R&D Tax Incentive is spent on startups, three critical goals are achieved. Startups 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," McCauley said.
"In short, you get a lot of bang for your buck when the R&D Tax Incentive goes to startups."
Similarly, CEO of Fintech Australia Danielle Szetho said the R&D Tax Incentive has already done so much to drive the fintech industry forward and the government now has a great opportunity to focus it where she believes it is desperately needed -- incentivising better collaboration between startups, corporates, and researchers.
The consortium of organisations has pitched its ideas to the government in the submission it made to the R&D Tax Incentive scheme review.
Submissions were called for after a review was conducted into the program that handed out AU$2.95 billion in 2013-14, undertaken by Chair of Innovation Australia Bill Ferris, Australia's Chief Scientist Alan Finkel, and Secretary to the Treasury John Fraser. Prime Minister Malcolm Turnbull had tasked the trio with "identifying opportunities to improve the effectiveness and integrity of the R&D Tax Incentive, including by sharpening its focus on encouraging additional R&D spending".
Amongst other things, the trio found the R&D Tax Incentive falls short of meeting its stated objectives of "additionality and spillovers", and that it could do more to encourage additional research and research into other sectors.
The panel of three startup veterans said that the R&D Tax Incentive is, and should remain, an important investment in a prosperous future for Australia.
When the findings of the review were published, McCauley said he wanted to see more focus on the "pointy end" of the program, where dollars spent on startups translate directly into jobs produced and additional R&D being conducted.
"StartupAUS has advocated extensively for boosting the R&D Tax Incentive for high-growth early-stage startups. Our view has for some time been that the government should look at boosting the amount allocated to startups under the program, while at the same time paying it quarterly to help young companies overcome cashflow issues," he said previously.
"We welcome elements of the review. We agree that reducing the administrative burden and providing greater transparency are positive steps."
The R&D Tax Incentive allows companies to claim a tax break for the money they spend on internal R&D, and in February last year, Parliament passed legislation that limits the amount for which companies can claim R&D tax breaks to AU$100 million.
In March last year, the Senate then voted against the Tax & Superannuation Laws (2014 Measures No. 5) Bill 2014, which included a proposal to introduce a 1.5 percent cut to the current R&D tax offset rates of 40 percent and 45 percent from July 1, 2014.
It was pitched by former prime minister Tony Abbott as a move that would result in savings of AU$550 million in underlying cash balance terms over the four-year forward estimates.