Australia’s startups to face skills and tax hurdles in 2017/18

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Australia’s startups to face skills and tax hurdles in 2017/18

In opening the 2017 Tech Fast 50 program for nominations this year, Joshua Tanchel, Deloitte Private Partner and leader of Deloitte’s Technology Fast 50 Program said that while Australian technology companies appear to be on target to meet the forecast contribution to GDP, Australia cannot afford to become complacent about its support of the sector.

“In 2016, Deloitte forecast that the technology sector will contribute an additional 2% to Australia’s GDP by 2020 (from 5% in 2014 to 7% by 2020, or $79 billion to $139 billion),1 and we appear to be on target to meet this goal,” he said. “However, there are looming issues around skills and tax incentives that will prove a challenge for some startups in the coming year.

“Overall, the Australian technology startup market is coming of age, particularly in the past two years. More Australians are creating global businesses that are stepping up on the global stage,” said Tanchel.

“While Atlassian is now well known, other companies such as Siteminder, Bigcommerce, Deputy and Plutora represent the new wave of local technology companies operating at a global level,” he said. “This strong pipeline of high-growth start-ups (‘gazelles’) reflects the success of the National Innovation and Science Agenda as well as a range of independent programs such as the Deloitte Tech Fast 50 program.”

For 17 years, Deloitte has championed Australia’s gazelles through the Technology Fast 50 program, and the maturity of the market can be seen by improvements in the calibre of entries. For example, in 2001 when the program first began, some 14% of entries had revenue levels of between $5-20 million, whereas currently over half (54%) had the same revenue levels.

“We are also seeing that Australian startups have more sources for funding than ever before and we expect the appetite for funding to continue in the coming year as businesses explore such new technologies as AI (artificial intelligence), machine learning and data analytics,” Tanchel said.

Potential hurdles: ICT skills availability and tax incentives

However, Tanchel warned that the government cannot afford to become complacent about the Australian startup pipeline, citing skills as an example of where Australia will need to remain vigilant.

“According to Deloitte Access Economics’ report for the Australian Computer Society, Australia’s Digital Pulse, demand for ICT workers is forecast to increase to around 695,000 ICT workers by 2020,2“ he said.

“Australia must ensure that it has a workforce equipped with the right skills to support innovative startups, and talent is particularly critical to the early stages of development within a startup business,” he said. “While ICT workers on visas are only 2% of the total ICT employment market3, it is expected that changes to 457 visas may impact the resources typically used for trials, testing and product development.”

Another issue for startups to monitor in 2017/18 will be the Review of the R&D Tax Incentive, which is expected to be released in the coming 12 months. “There is a potential that the government will restrict the refundable R&D tax offset to A$2m per annum, and other offsets may be treated as a non-refundable tax offset carried forward for use against future taxable income,” said Tanchel.

Cashrewards: a year of growth

Last year the online shopping sector was the strongest growing sector within the Deloitte Tech Fast 50 program and as a result, Cashrewards, the fastest growing online shopping community in Australia, took out first place. Cashrewards offers members a cheaper way to shop in Australia through the use of cashbacks, calculated as a percentage of the purchase price.

In the 12 months since winning the 2016 Deloitte Tech Fast 50, the business has gone from strength to strength. Cashrewards has expanded its 150,000 members to nearly 300,000 and online retail spend originating from Cashrewards has doubled from 1% to 2% of all online spending in Australia.

“Being part of the Deloitte Tech Fast 50 program has provided Cashrewards with fantastic brand exposure, terrific publicity and the opportunity to network across the industry,” said Andrew Clarke, CEO of Cashrewards.

“In the past year, we have done 2.5 million transactions and given away nearly 24 million dollars in cashback savings. We have also hit half a billion dollars in gross merchandise value delivered to our partner retailers and have grown from 14 full time staff to currently 41 employees, including an advisory board.

“My advice for success to other Australian entrepreneurs is to consider what your customers want from the onset, then consider overseas trends as well as what might become redundant in the next five to ten years.

“Other qualities that will lead to success in my view are to closely consider how to make your business agile and highly scalable,” he said.

Media Contact:

Karina Randall
Corporate Affairs & Communications
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About the Deloitte Tech Fast 50 program

The Deloitte Tech Fast 50 program not only celebrates the success of Australia’s fastest growing technology companies but provides ongoing support, opportunities to connect with potential investors and helps put them on the map – both domestically and globally.

The program ranks nominees involved in any tech related industry - from media, communications, software and hardware to life sciences and healthcare and clean energy - based on their percentage revenue growth over three years. And by making Australia’s top 50, companies are automatically nominated for the Asia Fast 500.

To qualify for the Deloitte Tech Fast 50 applicants must accumulate more than $8 million in revenue over a three year period. Those making Australia’s 2017 TechFast50 instantly become a recognised technology innovator, joining the ranks of previous winners including Prospa, Vocus Communications, Vinomofo, Siteminder, NextDC and Atlassian. All Tech Fast 50 entries automatically go forward into our Deloitte Asia Fast 500 where there a $1m threshold for the 3 year period.

The Rising Star Award caters for fast growth businesses that have been in operation for less than 3 years.

For more information about this year’s program, including eligibility criteria, and to make a nomination, please visit: www.tech50.com.au

Nominations close 29 September 2017.

Endnotes:

1. https://www2.deloitte.com/au/en/pages/economics/articles/australias-digital-pulse.html
and https://www2.deloitte.com/au/en/pages/economics/articles/connected-continent.html
2. https://www2.deloitte.com/au/en/pages/economics/articles/australias-digital-pulse.html
3. https://www2.deloitte.com/au/en/pages/economics/articles/australias-digital-pulse.html

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