Morrison’s tech and skills funding offers broad commitments — but it won’t help the current skills shortage

As the budget papers dropped last night, Australia’s tech and startup communities were scouring for detail on the Research and Development (R&D) Tax Incentive, a boost to skilled migration, and targeted support to close the tech talent gap.

While none of this materialised, there were a few glimmers of hope for the sector.

Here’s what tech leaders, VCs and business owners had to say this morning.

Measures to boost tech talent fail to address short-term pain

Adam Milgrom, partner at Giant Leap, said this was a “confusing” budget for the startup sector, focused on broad-based tech skills funding rather than targeted policy to boost startup and tech sector growth.

“There isn’t even a mention of startups in the budget,” Milgrom said in a statement.

“Once again the sector has been lobbed in with small business.”

Earlier this week, Tech Council of Australia chief Kate Pounder said the talent shortage remains the “single biggest challenge” for Australia’s tech community, and called for targeted measures to get more women into tech, government-driven training programs and modernised apprenticeships tailored for the tech sector.

The budget has allocated $3.9 million to support women in mid-career transitions to the tech workforce.

Lachlan Feeney, founder and executive director at blockchain consultancy Labrys said the budget “did little to alleviate” current talent shortages.

It “missed an opportunity to create a formal education stream” for training around blockchain and crypto technologies, Feeney said.

As Milgrom noted, the budget also failed to make any changes around skilled workforce visas. That’s despite the government being behind on its net migration projections, partly due to the closed international borders during 2020 and 2021.

The process of hiring skilled migrants is “expensive, time-consuming and full of red tape,” Milgrom said. Giant Leap has been trying to bring a recruit in from Singapore for seven months, he adds, “and we’re only part way through the process”.

Chief executive of Zai Paul Byrne also said his business had been hoping to hire in Australia instead of overseas, but “a lack of policy assistance — or even recognition of the problem — makes this difficult in the short term”.

Andrew Porter, chief executive of FinTech Australia said while earlier stage fintechs may be able to capitalise on the budget’s retraining incentive, the papers broadly failed to address immediate threats to growth.

“The sector now has to assume that any changes regarding skilled talent visas are politically too tough for either party to enact going into an election,” Porter said. 

R&D Tax Incentive

Pre-budget, there had been calls from the tech industry for further changes to the R&D Tax Incentive. The big asks included more clarity and faster payments once forms were submitted, as well as some long-sought after support for those developing software.

Ahead of the budget, Pounder told SmartCompany she wanted to see improved guidelines here, and clarity as to whether claims would be accepted.

In the past, businesses have found themselves having to pay back millions in R&D claims, after audit processes.

“We know that software-based R&D is now the main way businesses in this country innovate,” Pounder said.

“But we have a system that was drafted in the 80s and hasn’t quite kept pace.

“A lot of small businesses would say they feel like R&D payments for software are a lottery, and there are enough things in life that feel like a lottery.”

Elsewhere, Dr Rajen Manicka, chief executive of Holista Colltech, said while he welcomes additional tax deductions and the expansion of the patent box scheme, amendments to the R&D Tax Incentive scheme would have been more helpful to his business.

“What would be more useful is if the budget also expanded on the R&D grant program to include improvements on existing innovations,” he said.

Research commercialisation

The government has pledged $988.2 million over five years for a research package to drive university-industry collaboration, workforce mobility and research commercialisation.

That includes $150 million over five years to expand the remit of CSIRO’s Main Sequence venture fund; $37.4 million over four years to ‘take research from the lab into the market’; and $505.2 million to establish Australia’s Economic Accelerator grants, designed to support research projects from proof-of-concept through to commercialisation.

In a statement, Professor John Shine, president of the Australian Academy of Science welcomed these measures.

However he said the budget broadly “falls short of the vision needed to put Australia on a strong footing in an uncertain future”.

Shine noted a distinct lack of investment in basic science research and capabilities — the “first essential step” required for commercialisation.

“This at a time when science is at the heart of every major issue being faced by our nation: the pandemic response; national security, mitigating and adapting to climate change; and recovering from flood and other extreme events.”

Mixed reviews of employee share scheme changes

The budget failed to materially change employee share scheme (ESS) regulation that could “level the playing field for Australian tech companies”, Myra Beal, chief of staff and general counsel at Sydney-based software firm Metigy, has claimed.

The ESS changes outlined in the budget included measures to remove automatic taxation of holdings when an employee leaves a company, which actually passed through Parliament in February 2022.

Kate Pounder, chief executive of the Tech Council of Australia called the changes “vital reform”.

Treasurer Josh Frydenberg had indicated new reforms would “expand the availability of employee share schemes to more companies and employees” by removing the incentive for local startups to shift their tax domicile offshore and lose out in the global competition for talent.

The budget’s measures remove the cap on the number of shares or options that can be issued, and increase the value cap of shares from $5000 to a monetary cap of $30,000 per year.

Ron Gauci, chief executive of the Australian Information Industry Association (AIIA) welcomed the reforms, which will “help skilled innovators attract talent and see innovations move from the R&D stage to commercialisation”.

What works for startups?

The Tech Council of Australia has welcomed measures to boost digital skills and adoption of technology for small businesses, with Pounder saying in a statement this will work towards the Council’s goal of getting more people into tech jobs.

While there was not much clarification in the budget papers, Pounder also welcomed proposed reforms to employee share scheme regulation, saying this is “more critical than ever as we encourage talent to transfer and retrain into the tech industry”.

Finally, Pounder welcomed a $3.9 million investment over two years to encourage women to pursue tech careers.

While not much detail is available yet, this initiative will provide “mentoring and coaching”, in partnership with industry, to help women transition into tech mid-career. This is one of the only measures in the budget directly targeting the tech talent shortage.

“Getting more women into tech jobs is a great deal for women as tech jobs are amongst the best-paid, most secure and most flexible in the country. The gender pay gap is also half that of other high-paying jobs,” Pounder said.

“What we have in our industry is a trifecta of secure, well-paid, flexible jobs available to all people regardless of background or education.

“We want Australians to aspire to a job in our industry, and we want to help them find the pathway into their career.”