Onwards and upwards? Five focus areas for growth staged tech companies to keep top of mind

Support. Support. Support.

This is what our growth staged tech companies need.
End-to-end across their journey.

And there’s never been a better time to talk about this topic. Because as we continue to receive nominations for our 2017 Tech Fast 50 program, the tech industry is rapidly evolving.

While Australian technology companies appear to be on target to meet the forecast contribution to GDP, Australia cannot afford to become complacent about its support of the sector. Especially in light of the wonderful contribution that the sector makes to the overall economy.

In 2016, Deloitte forecast that the technology sector will contribute an additional 2% to Australia’s GDP by 2020 (from 5% in 2014 to 7% by 2020, or $79 billion to $139 billion)[i] and we appear to be on target to meet this goal.

However, there are looming issues around skills and tax incentives that will prove a challenge for some startups in the coming year.

Here comes the start-up sun

Overall, the Australian technology startup market is coming of age, particularly in the past two years. More Australians are creating businesses that are stepping up on the global stage – and becoming leaders in best practice and innovation.

While Atlassian is now well known, other companies such as Siteminder, Bigcommerce, Deputy and Plutora represent the new wave of local technology companies operating at a global level. This strong pipeline of high-growth start-ups (‘gazelles’) reflects the success of the National Innovation and Science Agenda as well as a range of independent programs such as the Deloitte Tech Fast 50 program.

For 17 years, Deloitte has championed Australia’s gazelles through the Technology Fast 50 program, and the maturity of the market can be seen by improvements in the calibre of entries. For example, in 2001 when the program first began, some 14% of entries had revenue levels of between $5-20 million, whereas currently over half (54%) had the same revenue levels.

So where does the current landscape leave growth staged tech companies?

Well, there are five fundamental focus areas for start-ups to keep top of mind in the coming year:

#1 Research & Development under the spotlight

The government has not yet released its findings into the review of Research and Development (R&D) tax, expected to be released later this year. For small businesses, there might be a cap on R&D of $2 million per annum. Other offsets may be treated as a non-refundable tax offset carried forward for use against future taxable income. Small businesses rely on having a high degree of certainty when it comes to investment and these uncertain tax matters are not conducive to growth.

#2 Stay tuned for tax rules

Government has made changes to the tax rules around start up employee share plans. The government had previously made the start up plans easier from a taxation and valuation perspective and are now looking to update the rules around securities in a similar way.

However, there are some anomalies that still need to be addressed between State and Federal authorities, particularly around the alignment with State based payroll tax. For example, at present there is no consideration of the start-up rules for payroll tax purposes. Startups have no specific exemptions nor are they aware of their requirements in the year of grant.

#3 Not so easy as 1, 2, 3…or 457?

The changes to 457 visas are based on occupations on a short and a medium term list. A key issue for growth staged tech companies are that on occasions, the skills required do not appear on the list, so it is not possible to access them. If the skills they need are on the short term list, they can apply for a two year visa (with one extension for another two years).

This issue? Well, if one is seeking to attract and retain staff, this short duration is a challenge if the best we can offer is only four years.

Australia must ensure that it has a workforce equipped with the right skills (at the right time) to support innovative growth staged tech companies, and talent is particularly critical to the early stages of development within a growth staged tech business.

While Information and Communication Technology (ICT) workers on visas are only 2% of the total ICT employment market[ii], it is expected that changes to 457 visas may impact the resources typically used for trials, testing and product development.

#4 Skills, training and demand

There needs to be a key focus on skills. The government cannot afford to become complacent about the Australian growth staged tech pipeline, citing skills as an example of where Australia will need to remain vigilant. According to Deloitte Access Economics’ report for the Australian Computer Society, Australia’s Digital Pulse, demand for ICT workers is forecast to increase to around 695,000 ICT workers by 2020.[iii]

In addition, the Australian government is planning to introduce a training levy to come into effect in March 2018, which could be another increased cost to small businesses – and something for all growth staged tech companies to keep in mind.

#5 Find the funding

Looking for investment? We are also seeing that Australian growth staged tech companies have more sources for funding than ever before and we expect the appetite for funding to continue in the coming year as businesses explore such new technologies as AI (artificial intelligence), machine learning and data analytics. Start-ups are certainly moving into the spotlight – and the potential is always there for an innovative idea to turn into an incredible offering – with the right backing.

So when it comes to gearing up your start-up, it’s time to be prepared and to plan ahead.

Ready.
Set.

Start-up!

Have you got what is takes to join the ranks of Australia’s most innovative and forward thinking Tech companies? Or know a company that does? Deloitte’s 2017 Tech Fast 50 nominations are open for just a few more weeks, find out more here >>

(1) https://www2.deloitte.com/au/en/pages/economics/articles/australias-digital-pulse.html

(2)https://www2.deloitte.com/au/en/pages/economics/articles/connected-continent.html

 


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