This week, the Federal Government released the Ambitious Australia report, the culmination of a strategic examination of Australia’s R&D landscape that I was honoured to contribute to as a member of the expert panel, chaired by Robyn Denholm.
This report matters for all of Australia’s RD&I (research, development and innovation) system, because it has the potential to unlock one of Australia’s most underestimated sectors: startups. They are not a side story in the economy, but an important driver of innovation, investment and job creation.
Our consultations confirmed what many of us have seen and experienced for years working with startups and investors: Australia’s policy and regulatory settings are not keeping pace with the realities of building and backing high-growth companies.
As the Government considers its response, this is an important moment for startups and investors to engage with reforms that, if implemented, would significantly improve the environment in which they operate.
For startups, one of the most significant proposals is reform of the R&D Tax Incentive (RDTI) – a vital support for so many startups.
A premium startup stream
The report proposes a premium startup stream that would amongst other improvements simplify access, avoiding the need to use consultants, and improve cash flow through quarterly payments, avoiding the need to use payday lenders – keeping precious dollars in the hands of teams who are driving innovation.
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The premium startup stream would offer a higher refundable offset rate for a three-year period to early-stage startups, with the potential to extend for deep-tech companies with longer development timelines.
The package also takes a more coordinated approach to startup support. It moves away from more than 150 fragmented programs towards a more coordinated system focused on six national priorities and up to 18 National Strategic Initiatives that would provide funding for proof-of-concept schemes, pre-accelerators, accelerators and incubators, helping to spur startup creation.
Support for investors
For investors the proposed recommendations would reduce barriers to participation and provide a more supportive regulatory framework to unlock more capital.
These reforms include broadening the definition of wholesale investor to include individuals with demonstrable startup experience, expanding eligibility and recognising SAFE notes within the Early-Stage Innovation Company (ESIC) framework, and expanding the crowd-sourced funding scheme.
For venture capital, the reforms will create greater capacity to support startups through their growth journey. This includes substantial reform to the Early-Stage Venture Capital Limited Partnership (ESVCLP) framework by lifting the cap on fund size and allowing larger early-stage investments, amongst other improvements. Another important longer-term opportunity is enabling more superannuation capital to flow into innovation.
The proposed changes are intended to reduce barriers to venture investment and provide a clear pathway to back Australian innovation firms.
With AI and rapid technological change reshaping the economy, we should be creating better conditions to build new companies and back new industries here in Australia.
Overall, this package is intended to create a more coherent and effective environment for startup growth and success.
For those of us in the sector, now is the time to advocate for these changes and make the case for a policy environment that better reflects the value the startup sector brings to Australia.
- Dr Kate Cornick is the CEO of LaunchVic, a member of the independent expert panel for the review Australia’s R&D policies, and deputy chancellor of Charles Sturt University.
