Rolling blog: Industry reacts to Budget 2016

Addresses where the hits and misses are

The Federal government recently launched a number of initiatives within the Budget 2016. This included a crackdown on GST-free online purchases, the launch of an enterprise tax plan, in addition to ramping up employment opportunities for the youth.

However, the ICT industry claims there are some hits and misses in this year's budget.

Strut Digital chief executive, Zack Levy, told ARN that the fact that the government is sticking with innovation is encouraging and will no doubt drive growth.

"If you cross-match all the initiatives surrounding the fintech industry, cyber security, the consideration of Blockchain technology and inspiring young entrepreneurs through the youth initiatives, it is clear that the government perceives the nation's growth will be driven through innovation in technology."

As a result, Levy said this will drive both direct and indirect benefits to Australia's tech sector.

However, Levy added that he would keep a close eye on the strong focus the government appears to have in regards to the tax announcements.

"An area of focus seems to be going after the tax avoiders like the big multinationals. Often, we feel as though we pay too much for particular services from these multinationals in Australia and I think that if costs increase, it could get passed onto consumers."

"I assume that many of these multinationals are also tech companies and I question whether the tax avoidance will have an impact on any acquisitions within the country that are being pursued by the government."

Levy added that overall, the budget reflects a practical view for steady growth.

Secure Logic group managing partner, Santosh Devaraj, said he strongly supports the $230m budget allocation for cyber security and believes a positive posture for the nation will ensue.

However, he noted that it was unfortunate that only the ASX Top 100 are targeted for cyber security 'Health Checks' as these are the organisations, you would think, that already have advanced security protection measures in place.

"The SMEs may be covered by the proposed Cyber Security Awareness campaign but there's no guarantee they will implement effective cyber security protection measures."

Devaraj added that a future Cyber Security Review would be a good idea to measure the effectiveness of the efforts put in place from this weeks budget announcement.

"We need to take a benchmark now on the nation's security posture to compare it at some point in the future to ensure the financial cyber security spend has been effective."

Additionally, Devaraj said Secure Logic looks to the future federal government 'mandatory breach reporting' legislation to have greater effect with improving the cyber security posture of Australian corporates in the short term.

"No company wants to be 'outed' for having poor cyber security protections in place, especially after the focus on cyber security in the budget. They can't say they weren't warned."

Distribution Central CEO, Nick Verykios, said the budget will have an indirect, positive effect on the IT industry.

"What will happen is, a lot of small business investments will go towards IT because more and more SMB issues are related to business scalability and efficiency. The solutions to these problems will only happen through strong IT investment," he said.

Verykios also mentioned that despite the obviously welcome SMB concessions, it is not enough.

"What tends to happen in these situations, is you give a little bit, but you forget what has been robbed of you in the past. What has been given back, is nothing compared to what has been taken away. The variation is dramatically different."

"We have been five steps back and now we are a couple of steps forward - so we are still three steps behind. However, at least we are going somewhere. You have to look at the now and the concessions will help SMBs," he said.

MNF Group chief executive and co-founder, Rene Sugo, expressed the disappointment on behalf of My Net Fone Group, that the government did not take the opportunity to write off part of the nbn network build cost following the announcement of the budget.

He noted that inaction by the Turnbull Government on this front threatens the feasibility of the nbn business model.

“The NBN business case is under serious threat. Failure for the scheme to reach a critical mass of activations could ultimately affect the viability of the whole telco industry and leave consumers worse off,” he added.

“In order to reach its targets, NBN has to be the ‘number one choice’ for data services for consumers and be available at a viable price point for service providers of all sizes to resell. As it stands, this is not going to be realistic."

MYOB chief executive, Tim Reed, said the accounting software provider has given the budget a rating of 9/10 for its positive impact on Australian SMEs.

He said the initiatives are welcomed, particularly as they recognise the power of SMEs in driving the nation's economy as it transitions away from a reliance on the mining boom.

However, Reed said the plan to cut the company tax rate to 25 per cent should be shortened.

"It's like SMEs have been given a terrific present but told it is coming in pieces and they can't open it up for a decade. "

Reed added that MYOB feels the government has finally listened to SMEs that have long called for a simplification of Business Activity Statements (BAS).

"Simplifying GST compliance has been a high priority for businesses for over a decade now so we heartily congratulate the government for announcing a trial to streamline the process. This is something we've been lobbying the government about for years, it is great to see this is a government that listens to and responds to requests from small business."

"If the government had the conviction to fully address the GST issue once for all in this budget, MYOB would have given it a 10/10, but we knew some time ago the government had no appetite to broaden the base of the GST - that is the only way to make it simpler for small business owners," continued Reed.

WatchGuard Technologies regional director A/NZ, David Higgins, said the government's investment into funding cyber security development, protection and growth in Australia is a positive step towards educating and protecting Australian organisations and SMBs.

"As Australia drives innovation, we will also need a focus on protecting our intellectual property as everything continues to become more and more connected," he added.

Check Point Software A/NZ regional managing director, David DeLaine, said the strategy is a step in the right direction, but would like to see more support for small business.

"You are as strong as your weakest link, and attackers see small business as the weakest link.

"The announcement of the cyber 'health checks' for the ASX100-listed companies is a step in the right direction and shows that the Turnbull government sees this as an important step for Australia. However, it does not address the business engine of the country – which are small businesses," he said.

"Large companies have budgets and skills to protect themselves, whereas small businesses do not. More needs to be done for small business in the area of cybersecurity. Something as simple as setting up a cybersecurity task force to educate small business and giving them budget/ financial benefits if they comply."

DeLaine mentioned the appointment of Alastair MacGibbon as the special adviser on cybersecurity within the Department of Prime Minister and Cabinet will aid the cause.

StartupAUS CEO, Alex McCauley, welcomed support for Fintech and expansion of the New Enterprise Investment Scheme (NEIS) in the Federal Government’s 2016 budget, but said overall this budget was a disappointment for start-ups with few advances on previous measures.

“This budget was a chance for the government to make good on its rhetoric about continuing to build momentum on innovation and Australia’s economic transition. But, from that perspective, it is a disappointment.
“We welcome the limited support for Fintech in this budget, as well as the extension of the NEIS. Support for young people exploring entrepreneurship is important. But these are small, niche measures in an area that still requires bold, substantial action," he said.

McCauley claimed there is little in this budget to advance the government’s support for innovation and entrepreneurship.

"Almost all the measures relevant to startups that the treasurer alluded to in his budget speech had already been announced, six months ago, as part of the National Innovation and Science Agenda (NISA). None of those measures have come into effect yet, although some have made encouraging progress recently.

“Start-ups didn’t expect any game-changing announcements in this budget. Implementing the NISA agenda items is still the top priority. But it’s critical that we don’t lose sight of the importance of genuine high-growth technology companies as a critical driver of Australia’s emerging economy," he added.

ACS president, Anthony Wong, said the professional association for Australia's ICT sector was particularly pleased to see a sensible approach to fintech regulation mentioned in the budget.

"The idea of having a regulatory sandbox will help encourage innovation and experimentation from new businesses, and recognises that disruption is driving the fintech space."

Wong added that the ACS was pleased to see the high priority the government is placing on the issue of cyber security with the confirmation of funding for the recently announced Cyber Security Strategy.

He also said, “With the growth of innovation and entrepreneurialism we are seeing many more small businesses entering the market. It is important that we create an environment that encourages innovation and this reform is a part of that. The announcement this morning that the Senate has supported reforms to tax arrangements for early stage investors and venture capitalists demonstrates that the Parliament understand the importance of innovative businesses.”

The Beanstalk Factory CEO, Peter Bradd, mentioned that the budget address contained a lot of rhetoric around jobs and growth.

"The reality is, both jobs and growth and our national economic advantage won’t come from savings or these tax cuts alone, it will come from innovative business practices within existing businesses and start-ups."

However, Bradd mentioned the Fintech announcement and the expansion of the New Enterprise Investment Scheme (NEIS) are a step in a good direction.

"Research and development is critical to our future growth - I would like to see a lot more to encourage Incubators and accelerators both within the start-up community and outside it within big business.

"We also need a lot more creative thinking around how to encourage more young people and more Australians into high growth entrepreneurship. As demonstrated overseas, this can be done in partnership with our larger corporate community, in a way that benefits existing businesses and helps stimulate growth but also grows our start-up economy," he said.

The Australian Retailers Association (ARA) has welcomed the Federal Budget’s moves to bring spending under control while announcing company tax cuts for SMBs.

ARA executive director, Russell Zimmerman, said the ARA commends the government on making a path to reduce spending while supporting consumer and business confidence in a soft confidence pre-election environment.

“The ARA is pleased to see corporate tax cuts, which will help SMBs and the millions of people they employ. On top of this effort, the work to offset bracket creep through personal tax threshold changes will be a boost for consumer confidence and spending.

“While tax cuts for SMBs are welcome, whoever wins the election needs to cut company tax across the board to make Australia more attractive to international and local investment. There is no question that Australia’s company tax rates are excessive by international standards," Zimmerman said.

He added that changes to international tax compliance are welcome, along with the government’s commitment to fix GST loopholes such as the Netflix Tax and low value GST compliance on goods under $1000, due to be implemented mid next year.

OKI Data Australia marketing manager, Antonio Leone, welcomes the government's tax cuts for small businesses.

"Small businesses are the engine-room of our economy. The cuts will allow these businesses to investment in newer and more advanced technology, which will in turn help deliver more contribution to the bottom line," Leone said.

The Business Council of Co-operatives and Mutuals (BCCM) has welcomed the measures announced by the government to support employee share schemes, self-employment, and entrepreneurship among youth.

BCCM CEO, Melina Morrison, said the government’s investment of $840 million in a Youth Employment Package to help 120,000 young people into jobs, including $88.6 million to support young people who wish to start their own business is a good move.

“In today’s gig economy, we are setting people up for repeated joblessness unless they are able to take greater control over their place in the workforce, by becoming co-invested, financially or by other means,” she said.
“The BCCM is pleased with the overall direction of the budget, but we note that more needs to be done on reducing red tape for people who wish to enter into collaborative and co-owned business relationships,” Morrison added.
- Holly Morgan contributed to this article

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