Ed Husic (Chifley, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Treasurer) Share this | Hansard source

If the value of innovation to the Australian economy is to be fully realised, we need to address the concern among smaller companies, among start-ups, that larger and more established sections of our economy have had the ear of government, regardless of politics, for way too long. They believe it is easier for miners and farmers to get into a minister's office than it is for some of these firms to do so. We need to actively dispel that notion by demonstrating support, through this parliament, for changing this perception through deed not just word. It is easy for the minister and others to talk about the negatives of the previous bill—the changes that we made in government which we have acknowledged have caused the unintended consequence of making life more difficult for start-ups. We have acknowledged that not just in word but in deed. In 2013, we were the ones who kicked off the process of getting Treasury to look at how we can change the law to ensure that the impact on start-ups would not continue and would not act as a drag on innovation in this country. We started that process.

Based on our dealings with the sector, a lot of us would have preferred that that happened way earlier—absolutely. But I would point out that, as much as the coalition were very keen to see change happen, it is nearly two years since they started talking about this when they were in opposition. The Minister for Communications was talking about this issue when the coalition were in opposition. When the coalition was elected to government, a number of backbenchers said they wanted to deal with this. It took them a considerable period of time; it did not happen in the last budget. In fact, it was continually promised that action would be taken and legislation would be enacted in a speedy way. But it took a long time to happen. Why? It was because, as people know, this is not an easy area to deal with. It took a lot of work to determine how much money would be set aside by government to deal with this—and the answers were not present quickly. Despite the eagerness displayed by a number of people, including the minister, to deal with it quickly, they did not, they could not. So we can certainly play political games if you want to, but I do not think that is of any value to this sector.

What is important is seeing action. That is why the opposition is keen to work with the government in supporting this bill and making sure that it goes through so that we can move quickly to a situation where start-ups are able to offer these things as part of the remuneration package that they extend to people they want to bring on board to help them bring their ideas to life and transform the economy. There is a lot at stake. Matt Barrie, the founder and Chief Executive Officer of Freelancer.com, said: 'The fact that a 20-year-old can start a company worth $20 billion is mind-blowing.' But that is where we are at. Matt Barrie has done remarkable things, and he is absolutely right. That quote, in itself, indicates what a remarkable time it is for young Australians in this country. We are on the threshold of potentially fundamental shifts within our broader economy, and it is younger Australians who can drive it. These are not established companies, people who are long in the tooth and have built up a long list of experiences; these are young people with the guts and determination and capability to change the way the economy works. This been unleashed through the internet and through the innovation that has sprung from it. The imperative is there.

The reason I am so enthused about the sector is that they can fundamentally change and re-gear our economy at a time when we need it most. We are seeing our sources of income and economic wealth change. We have pressure on us to grow sectors of the economy other than mining. We need to see that change occur. We also need to get ready as technology slices into all those jobs that used to exist and changes the way companies work. It will put greater demands on the individual skills of Australian employees. They will not be able to get the same manual jobs and entry-level jobs that once existed. It will fundamentally alter the way that they live in the world of work. And so we need to be able to look at this sector and we need to be able to work out how we can encourage its greater growth.

And, why the fuss? It may seem that start-ups themselves—particularly when they have been mentioned so much in the last couple of weeks on the floor of the House of Representatives—are the fad du jour. But put quite simply, there is no such thing as overnight success. As Seth Godin, the marketing writer, said:

… it takes about six years of hard work to become an overnight success.

He is quite right. Look at the stories of a lot of these people: people like Jodie Fox and Shoes of Prey; Leni Mayo and the others at 99designs; Scott Farquhar and Mark Cannon-Brookes at Atlassian; and Rebekah Campbell at Posse.com—I recall all the stories she has told of the pitches she has had to make to try to get funds and support to build and bring her vision to life—and a lot of them will tell you that there is no such thing as overnight success. They have had to work at it for quite sometime.

They have been on a long pathway to this point. But in terms of start-ups themselves, they also are not just an overnight success. They are actually a reflection on the evolution of innovation. Innovation was once driven primarily by government R&D. It then went into big business and then big business outsourced it to smaller research capabilities and firms and it is now start-ups that are leading in research and development. And they can only do it, fundamentally, through a number of key ingredients. Naturally, having faith in their own ability to bring their ideas to life is one thing. But they need two other things on top of that: they need the talent and skills—people who have the know-how to help bring those ideas to life—and they need capital.

The reason this bill is so important is because it helps deal with the issue of capital. It helps deal with the issue of being able to defer in some way the pressures that might exist on a start-up in being able to stump up money quickly and being able to funnel it through remuneration. For instance, those start-ups that do not have the money there to pay people for the talent and skills that they bring to that start-up can defer that wealth creation by providing options—shares or some sort of equity in the start-up itself. That is how these share schemes and options have arisen.

In 2009 there was an intention to deal with the attempt by bigger businesses to change the way they remunerated their executives—basically by paying them through options and share schemes, and not having salary packages structured in the way that they were. That was the intent. The unintended consequence was that it affected start-ups who wanted to be able to issue these options. It was something that had a terrible impact on start-ups. Certainly, a number of us have acknowledged the impact that existed for these start-ups and this is the big reason why we have been keen to support a change. As I said earlier, we started that process when we were in government. It has now been picked up by this government and we support the move.

We certainly recognise the range of things that this bill seeks to achieve. For example, deferring the requirement to have taxation paid until the actual options are exercised. There is also the provision of an additional concession to start-up companies that will target young enterprises to reactivate and energise employee share scheme arrangements, as the Minister for Small Business indicated in his second reading speech. It will also, through the types of initiatives that have been announced by the government, see the Australian Taxation Office work with industry to develop safe harbour valuation methods and standard documents that will be useful for the sector. In particular, it is targeting those start-ups with revenue under $50 million. And, as I indicated before, there is the requirement for taxation only when the value is realised. These are important steps.

I might add that I have detected, from the consultations that I have had with the start-up sector, a degree of interest by a number of listed companies. They have sought to exercise a degree of pressure on the government—which I see it resisted, and I think it is important that it was resisted—to put in place arrangements that would have benefited listed companies to a far greater extent than was proportionate or proper. The bill makes sure that a lot of this benefit is targeted to start-ups themselves. That has been very important, and it is something we should keep a watching brief on.

In making these changes, if there is a temptation—for one moment—to think that this mechanism alone will support start-ups then that is misplaced. It is quite clear that there is still a very big reform agenda that is required to ensure that start-ups will continue. As I said before, they are at the front of innovation. They are now picking up the lion's share of R&D in this country by way of what they are doing in breaking down existing business models and changing the way that a services economy like ours works—70 per cent of our economy is based on services and they are very vulnerable to disruption. They are doing a lot of work there, but there is still a lot to do.

Start-up communities certainly welcome it. I have detected this in my consultations with the community and I am sure that the Minister for Communications, sitting at the table here, has detected that, as I know he talks with representatives of the start-up community quite a lot. They certainly welcome the extra attention. But my biggest fear is that this will become a fad, and we cannot afford it to be a trend or a passing phase. Start-ups themselves are adding enormous economic value to the nation. They cannot be seen as an afterthought or a passing thought, as the shadow Treasurer said in his Press Club speech last week. They have to remain constantly in our thoughts because they will generate the jobs of the future. Every single job in the tech sector has the potential to generate five others. In the US, the tech sector—as I have indicated previously to the House—is experiencing job growth at a rate of 25 times the rate of other sectors. We cannot afford to think or believe that start-ups are simply the creators of neat or nifty apps that might have some sort of limited productivity benefit. This is the wrong way, and undersells the value of the work of start-ups in our broader economy and in our community. They generate real economic value, and we cannot afford to see them just ignored as a fad that will pass.

This is why shadow Treasurer Bowen, the member for McMahon, indicated that we will set up a Treasurer's entrepreneurial council that will ensure that the Treasurer, one of the key drivers of the development and implementation of economic policy in this country, has input at the time that is critical in the development of policy. The assistant shadow Treasurer said today that this whole area will continue, whether or not the benefits are delivered from the bill that is being debated now. That is important. I certainly welcome that initiative.

We also need to make sure that we continually address those two areas that start-ups say need attention—building up of talent in this country and being able to ensure that the next generation of people who go into the sector will have the skills and capability to do so. But we can also ensure that talent from other parts of the world come here too. That is an area that needs reform as well. We can bring back our own talent that has been developed here in Australia but is sitting in other parts of the world. For instance, when I visited the United States I was staggered to hear that 20,000 Australians work on the west coast in the sector. We need to bring them back. We need to greater support those ideas through capital. I certainly think the other area that needs reform is finding a way to build bridges between one of the largest national savings pools in the world, our superannuation sector, and the VC and angel investor community to ensure that we have greater support for ideas on the way through.

We have a lot to do in this space. This bill is important—I certainly recognise that—but it is not the final step. It is one step in a continuing journey to ensure that Australia can exercise its full potential, generate jobs for the future and make an impact on a world scale.

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