Is there a real ‘start-up party’ in this year’s election?

Margaret Paton

Are you getting fed up, or even confused? That’s the feeling we’re getting from start-ups and entrepreneurs about what’s on offer from the major political parties in the federal election campaign.

The problem is, there’s no clear contender for the ‘start-up party’ mantle, but the sector is clearly keen for reduced regulation and tax, boosted funding options, collaboration with government and faster internet speeds.

The Young Entrepreneurs’ Society of Australia makes this perfectly clear with Managing Director, Thomas Reid, saying entrepreneurship is without boundaries or restriction.

“Entrepreneurs demand and create solutions no institution can provide because problems are created faster than government capacity as they are accountable to the majority.

“Entrepreneurs need the government post 2 July … to provide a culture and environment that allows entrepreneurial thinking and solution-finding quicker and without bureaucratic restriction.”

That means, less red tape.

Is there a ‘best party’?

Entrepreneur, business coach and business lecturer Steve Semmens, of The Persuader, says no party is great for entrepreneurs or start-ups.

“They just don’t understand business. They’re talking about innovation and creativity, but they’re not doing anything.”

Reid, from the Young Entrepreneurs’ Society Australia, echoes that saying his network of entrepreneurs aren’t backing a particular party.

“We’re not convinced that the [Liberals] or the ALP have [entrepreneurs’] best interests at heart despite arguments from each parties proposed budgets.

“Promises are empty and … the vast majority of our members have stated … concerns about voting for the ALP simply because of their track record in not producing the economic result worthy of sustaining,” he says.

Despite this, UNSW economics Professor Richard Holden, a regular commentator in this space, says both Liberal and Labor parties support entrepreneurship and innovation.

“Neither side has a lock on it, but they both understand the need for Australian businesses to innovate and grow. They are very generous towards small business.”

"Small business lender Kikka Capital, David Brennan doesn’t think tax breaks will “make a meaningful difference in the day-to-day lives of many small business owners”.

What’s happening with tax?

The Coalition has pledged to cut the tax rate for small business and those turning over less than $10M to 27.5% from July 1. Move forward to 2023-24 and the rate for all companies would be 27.5%, then just 25% three years later. Labor’s talked about a lower tax rate for small business, but will keep the $10M threshold for small business.

The Greens’ policies are negative towards start-ups and entrepreneurs; in short “very dangerous towards innovation and the economy generally”, says Holden, who specialises in how firms grow, use incentives, boost productivity and structure themselves.

“The Greens advocate materially higher personal tax rates, are against company tax rate cuts, believe in higher taxes across the board and want to get rid of the capital gains tax discount rather than scaling it back as Labor has said.”

“The government has said if you want less of something, you tax it more. The Greens will tax it more and you’ll get less … economic growth.”

Greens Senator Nick McKim, who holds the small business portfolio, says his party makes “no apologies for opposing further business tax cuts at a time when schools and hospitals are so badly underfunded.”

“We also support a fair dinkum NBN and are proposing billions of extra dollars for renewable energy, both of which will help innovators and entrepreneurs continue Australia’s transition to the new economy,” he said, citing the Greens’ innovation policy.

Meanwhile, MedAdvisers Robert Read says neither major political party has been bold enough to seek a much-needed mandate on wholesale tax reform, but both support continuing the research and development tax incentive.

Water3’s entrepreneur Damien Stone says there needs to be a more supportive tax environment for start-ups:

“If you look at the tax breaks and incentives available for businesses across the world, Australia just doesn't compare.” Read adds that making Australia more tax competitive globally will “attract the very best companies and talent to come and live here”.

Or will it? The founder of online small business lender Kikka Capital, David Brennan doesn’t think tax breaks will “make a meaningful difference in the day-to-day lives of many small business owners”. You’ll get traction, though, on tax concessions supporting investment in particular industries and innovation in product and service delivery – they’ll drive new opportunities.

And what about that red tape?

The Small Business Association of Australia (SBAA) isn’t impressed its sector’s operators have to wade through 54 tax acts just like big businesses.

“A one-person or even a five-person company has difficulty in building and operating a successful business without the imposition of non-profitable, complex and difficult, multiple, government tax collection activities,” says the association’s Small Business Policy Chair, Lionel Barden.

The number of new start-ups has decreased for the second quarter in a row, says Barden, meaning “something is drastically wrong” in the small business sector. As well, ABS statistics show more than half of new businesses fail within five years.

“[Government] … particularly those people who write legislation, do not understand the hardships of small business.”

Kikka’s Brennan says he welcomes “anything that cuts bureaucracy while ensuring a fair and level playing field that gives customers access to the best financial products and services available - and in some cases yet to be developed”.

More collaboration with government

Is collaboration with government then, a backdoor way for start-ups to void over-regulation? Kikka Capital’s Brennan doesn’t quite have that slant on it, but explains the need.

“Government is notoriously slow to catch up with tech-led industry developments so we want to make sure we can keep solving customer problems at a pace that the market demands.

“We’ve got a vested interest in making sure we do the right thing as we’re in it for the long term and as our industry is relatively new, the image can be tarnished easily if individual businesses don’t do the right thing.

“That doesn’t mean we’re against regulation, just that we think a collaborative approach, which listens to industry operators and customers, should be the focus, not regulation designed in isolation from market dynamics,” he says.

Appiwork wants the post-election government to give small business greater access of government procurement.

Business Development Manager Zoë Hida says: “As a start-up, it can be challenging finding the right business niche, even though there are so many areas that could be innovated with State and Commonwealth public services

“Welcoming collaboration with start-ups is an opportunity for start-ups to get bright new ideas and make exciting new business opportunities available.”

The Young Entrepreneurs’ Society also calls for collaboration, saying it should be with “proven enterprises who embody the true essence of entrepreneurship”.

MedAdvisor’s Read also calls for more government partnerships, saying  CEO, working with smaller innovative companies to solve macro problems such as healthcare spending, for example, “can help efficiency gains to be implemented faster and cheaper”.

Make the NBN happen ... now

Crucial to those partnerships, though is a decent national broadband network. And that’s a huge issue for start-ups, particularly in regional Australia says Appiwork’s Hida.

“Innovation often springs from the bush. We need governments to provide at least a level playing field with start-ups in capital cities with high-speed internet.”

The Persuader’s Semmens agrees.

“Businesses should be first [onto the NBN] as it means more sales, more jobs and the government will get money back from company taxes. Labor’s plan for fibre to the premises was a lot better than the Liberals’ fibre to the node. It just doesn’t work because we still have to deal with copper.”

"There is simply not enough capital in Australia to support start-ups in the long term.”

Incubate, then what?

Another crucial issue for growth is incubation options. Water3’s Stone calls for alternatives to offer more progressive support at each step of developing a start-up.

“There are plenty of entry level facilities and grants available to start-ups, but without ongoing support they fail to ever get off the ground. There is simply not enough capital in Australia to support start-ups in the long term.”

SBAA’s Barden agrees saying high-net-worth investors are “risk averse”: “It’s almost impossible to look outside the stock exchange for funding for small business.”

Open up funding options

While many start-ups say they’re keen for the Federal Government post-election to quickly pass legislation kick-starting equity crowdfunding, it might be a bit of an anti-climax.

UNSW’s Holden says: “The jury’s still out on whether crowdsourcing will be a bit deal or not relative to venture capital funding from the private sector. In the US, some businesses who do [equity crowdfunding] become very successful and have rounds and rounds of it.”

It’s all about jobs and growth

With two decades’ experience in beverage marketing and branding – including with Lion Nathan, Coca Cola and Schweppes – water3’s Stone might know a thing or two about jobs. Actually he also founded Mums Returning to Work, a coaching service, more than two years ago.

“It’s not the government that creates jobs – it’s entrepreneurs that create jobs,” he says.

But is that a myth? It’s actually big business that are doing that plus productivity growth, says Holden.

“However, there’s more votes in tilting the playing field in favour of small business.”

Margaret Paton

Former Sunday Age staff journalist, Margaret Paton (formerly Jakovac) has written widely for corporations/government departments and more than 100 online/hard copy mastheads in regional NSW, Sydney, Melbourne and Europe.

Image: Russel Street, Flickr Creative Commons License