AIIA 'optimistic' on share option fix in tough startup environment

"We are at risk of losing smart ideas and smart people in a systemic way," says AIIA CEO Suzanne Campbell

AIIA CEO Suzanne Campbell says she's ready for changes to tax rules holding back startups. Credit: AIIA

AIIA CEO Suzanne Campbell says she's ready for changes to tax rules holding back startups. Credit: AIIA

The Australian Information Industry Association is optimistic that the rules restricting startups' ability to recruit and retain staff may change, said the association's CEO Suzanne Campbell.

The current tax rules, introduced by Labor government in July 2009, discourage Australian startups from providing share options to employees. The rules require that the employee is taxed on the value of the share option when it is issued, before any payments are made.

In other countries, the employee is not taxed until they execute the option. This is said to be better for cash-poor early stage startups, which can use share options as an alternative to a larger salary.

The AIIA made a submission to the current Parliamentary review and supported members including Deloitte, which submitted a proposal for a new approach to share options.

“I’m more optimistic this time than last year,” Campbell said in an interview.

That’s because this year both the Treasurer and Communications Minister Malcolm Turnbull have voiced support for the review and said they understand the need for a change, she said. “Last time around we didn’t have the Treasurer making those sorts of comments.”

The tech industry has long clamoured for change, but the government has responded only recently.

“We had a review last year, we’re having a review this year,” said Campbell. “I think it’s time we got beyond reviewing and started actually implementing change.”

Campbell said that Australia’s startup scene shows great promise but is currently constrained by the regulatory environment.

“We’ve got the inventiveness of Australians which is undeniable, but the commercialization of that invention, the creation of innovation, is challenged by a number of environmental factors,” she said.

“We are at risk of losing smart ideas and smart people in a systemic way.”

However, Campbell said she does not believe Australia’s tech darling Atlassian should be criticised for its decision to register as a UK business.

“Atlassian have reached a point in their development where they’re making a decision that’s best for them,” she said. “I’m sure that no one would inquire too deeply into the motivations of mining companies that make those same individual decisions.

“My concern is that we have not created an environment where there are lots of Atlassians,” she said. “We want an embarrassment of riches.”

Australia should foster an environment in which companies that wish to stay in Australia can do so, she said.

"Individuals will always exercise their freedom of choice, but we don’t want to be in a situation where we are motivating them to move offshore. That’s nonsensical.”

The AIIA believes a step in the wrong direction was the government’s decision to dump a tax reform proposal to allow R&D tax credits to be provider quarterly rather than yearly as it is now, said Campbell.

“We understand the position of the government in relation to the cash flow impact for the government, but there’s also a major cash flow impact for the relevant tech startup companies,” she said.

“You will need industry participants from all types and sizes to be contributing to the creation of a vibrant, energetic ICT industry. These companies have the discretion, the opportunity to do their R&D in any country, so we definitely want them to continue doing it here.”

The AIIA outlined the IT industry’s priorities for the year in the association’s Smart ICT 2014 Vision report.

Adam Bender covers startup and business tech issues for Techworld and is the author of a dystopian novel about surveillance. Follow him on Twitter: @WatchAdam

Follow Techworld Australia on Twitter: @Techworld_AU

Tags tax rulesIT industrystartupsregulatoryregulationAustralian Information Industry Association (AIIA)Suzanne Campbell

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