“Smoke and Mirrors”: Startups react to the 2023 budget

Treasurer Jim Chalmers has handed down his second budget in seven months, and it’s made a few healthier contributions to the startup space than last time. But it is still a mixed bag of reactions from Aussie founders and startup professionals.

Startup support

As we reported on the night, the biggest win for startups was the $392 million for a new Industry Growth Program.

Other positives for startups and SMEs included the extension of instant asset write-offs (albeit at $20,000 now) and the Small Business Energy Incentive.

But that doesn’t mean there weren’t gaps, which many founders were quick to identify.

“Recognition of the crucial role SMEs play in the strength of the Australian economy is critical. Relief measures via the Small Business Energy Incentive will help businesses shift to renewables while also lowering the cost of doing business through tax relief such as $20,000 instant asset write-offs, and $1.5 billion for the Energy Bill Relief Fund.

Investment in growing the SMEs focused on critical priorities through the Industry Growth Programs could also help emerging deep tech companies bridge the valley of death on their pathway to scaling. While details remain to be seen, aligning the program to create a pipeline of investment-ready projects for the $15 billion National Reconstruction Fund should provide a clearer pathway for deep-tech businesses to start, grow, and scale. ”

– Sally-Ann Williams, CEO of Cicada Innovations

“Australia is losing our future rising stars as companies here look to overseas investors.

“The Small Business Energy Incentive is smoke and mirrors for Australia’s startup ecosystem, however the allocation of funds to help startups commercialise their ideas is a positive step. We’d like to see grants like NSW’s MVP Ventures grant expanded nationally.”

– Ben Zyl, CEO and co-founder of Waave

“The extension of the instant asset write-off is warmly welcomed, as it provides much-needed relief for numerous small businesses currently facing challenges. As SMEs employ around 7.8 million people in Australia, accounting for approximately 66% of the total workforce, this measure has a significant positive impact on the economy.

“Furthermore, the Small Business Energy Incentive will empower entrepreneurs across Australia to make capital-intensive investments in their energy infrastructure, driving innovation and growth. Representing over 800 members of Entrepreneur’s Organisation across Australia, all of whom run small to medium businesses, we remain hopeful that the government will continue to invest in our sector, promoting entrepreneurship and delivering practical measures to support business owners throughout the nation.”

– Damian Blumenkranc, president of the Melbourne Chapter of Entrepreneur’s Organisation

“This year’s federal budget played it safe for SMEs and startups. Through Zeller’s research conducted with our customer base of over 30,000 Australian businesses, we understand that many are hurting. Thirty percent of businesses are being faced with declining customer spend, while 40% have seen increased costs of supplies. With the pressure of inflation impacting both the top and bottom lines of small businesses, anything the federal government can do to put money back in their pockets and support those who are taking on the burden of running a small business through challenging times is eagerly welcomed.

“It is positive to see the extension of the $20,000 instant asset write-off for small businesses, which many had expected to come to an end. Enabling small business owners to write off the cost of assets invested in growing their business.

“The $392 million Industry Growth Program is also a positive announcement and has the ability to support SMEs and startups in commercialising their ideas.

“To ensure the success of this program, funding needs to be directed toward new and creative entrepreneurs who are taking opportunities to think outside of the box and solve some of the biggest challenges in Australia such as renewable energy and medical technology. This program will not attract its desired outcome if the funding is funnelled into established or longstanding organisations that carry a much lower appetite for risk. “

–Ben Pfisterer, CEO and co-founder at Zeller

“The government was clearly focused on delivering cost-of-living relief with this budget but it has missed an opportunity to address one of the biggest issues triggering it — the increasing costs associated with producing food in this country.

“Despite a focus on small business, it has failed to truly ease the pressure for the small businesses based on the land — farmers and graziers who produce our food.

“It’s hard to make a living on the land and it’s why we’re seeing a worrying trend away from the farming families who support local communities and toward the big corporations who buy up land and drain local communities of support and talent. Again, this is an area where we would have liked to see more support from the federal government.

“There’s so much innovation in the bush but it’s harder in regional areas to bring an idea to fruition. Telecommunications services are still very poor in many rural areas — we don’t have mobile coverage or reliable internet on our farm — which makes it very hard to run a small business let alone get a new one off the ground.”

– Bianca Tarrant, co-founder of Our Cow

Women in business and STEM

While there was a lot of talk about women in the budget overall, when it came to skill building and career progression in the workplace, things felt a little more like breadcrumbs.

That’s not to say there was nothing.

The government is providing $8.6 million over four years for the previously-established Australian Skills Guarantee that will ensure one in 10 workers on major government-funded projects will be an apprentice, trainee or paid cadet.

There will also be sub-targets for women for projects costing $10 million or more. The targets will be higher for projects with contracts over $100 million.

Lastly, the budget is extending the Women in STEM Cadetships and Advanced Apprenticeships Program until June 30, 2027.

Over three years, $5 million will be provided to organisations “with appropriate expertise in supporting women in the workplace” with a view to supporting women in historically male-dominated trade apprenticeships.

Founders would like to see more, too.

“It’s great to see that the government is implementing initiatives like the publishing of gender pay gaps, which support better gender equality under the Fair Work Act. However, we had hoped to see other initiatives which encouraged employers to train, retain and hire women in business, especially in skills shortage areas in this budget.

– Caitlin Zotti, Co-CEO of Pin Payments

“Australia’s low parental leave allowances cause strain on millions of families, so it’s right that the government is going ahead with increased childcare subsidies from July. However, exorbitant childcare costs mean it remains financially impractical for many parents to return to work. In Australia, women still take on the vast majority of childcare responsibilities, and this means they disproportionately pay the price by pausing their careers, subsequently missing out on growth opportunities, income and superannuation.

“While the extended paid parental leave scheme is a positive move, the private sector still needs to play its part in supporting working families. In a tight labour market, it’s likely we’ll see more businesses offering parental leave and childcare benefits, as they look to attract and keep the best talent.”

– Aline Van Koninckxloo, head of people at Stake

Visa Application Charges

Here’s one policy we spotted that affects investors.

The government is increasing Visa Application Charges (VACs) from July 1 2023, with business innovation and investment visas requiring an additional 40 percentage points.

“Overall, the budget has delivered several wins for startups and founders.

“From the Industry Growth Program to the funding for AI adoption and more, the government reprioritised and recognised the importance and contribution of the startup ecosystem to the Australian economy.

“One measure which caught our attention was the extra VACs hike for business innovation and investor visas, which will increase by an additional 40 percentage points.

“Australia rightly prides itself as a global hotspot for successful startups and tech talent. However, global success demands global talent.

“At Antler, a large proportion of our founders were not born in Australia — and many of the most successful global tech companies were immigrant-founded like Stripe or SpaceX.

“While the increased revenue generated from the fee hikes will fund costs associated with improving visa processing, adding any barriers to entry for overseas entrepreneurs to build in the rich Australian ecosystem hinders the likelihood of more Aussie-headquartered unicorns in the future.”

– James McClure, partner at Antler Australia

“For startups and early-stage entrepreneurs, this year’s budget also flags up to a 40% increase in costs associated with visa applications, which risks stifling the recovery of Australia’s international talent pool that supports our technology sector.

“Our Australian startup ecosystem’s ability to attract international talent was put on hold through border lockdowns as a result of the COVID-19 crisis, and our ability to attract and re-build this international talent pool may be challenged by increasing costs associated with bringing in and retaining tech talent — such as engineers, or product managers — within Australia’s growing startup ecosystem.

“Now is a time that Australia should be removing all barriers to entry to attract the world’s best tech talent, not adding new barriers through increased operational costs and visa charges.”

–Ben Pfisterer, CEO and co-founder at Zeller

Artificial intelligence

The budget also includes $101.2 million to support small businesses to include both AI and quantum technologies within their operations.

This will include support for the adoption of artificial intelligence by SMEs to improve their business processes and trade competitiveness. Some of the funds will also go towards the expansion of the National AI Centre.

Reactions to this have been mixed.