Thinking | 15 October 2020

What women in startups want and what the 2020-21 Federal Budget will deliver

By Jacqui Barrett and Rebecca Kazzi

Given Hall & Wilcox’s ongoing work in support of women in startups, we took great interest in how the 2020-21 Federal Budget could create opportunities for female founders and women working in startups.

Last year, we surveyed a range of women in startups and asked them to tell us what obstacles they faced in the startup sector.

The responses from our survey, as documented in our ‘Spotlight on Women working in startupsreport (Report), told us that women working in startups required greater flexibility and financial support to be able to effectively pursue their business objectives.

The survey results indicated there are broadly five categories of support that females in startups would find valuable for the growth of their customers, their teams and for the attraction of capital, including strategic guidance, investment, improving focus, quality recruiting and educating investors about female founders and women working in startups.

We analysed the Budget measures against the categories of support sought by women in startups in our Report. We set out the results below.

Women in startups told us that…. Federal Budget measures
Investment is key – dollars, sponsorships and partnerships.

An inability to attract early investment is a strain felt more acutely by women as a result of Australian investors tending to want female founders to have a product ready for market with a proven track record before investing.

The Federal Budget included funding of $231 million over four years from 2020-21 for the Second Women’s Economic Security Package.

Relevantly for female founders and women in startups, the Government has pledged $35.9 million over five years to increase the number of co-funded grants to women-founded startups under the Boosting Female Founders Initiative and to provide access to expert mentoring and advice for women entrepreneurs.

As noted in our Report, providing women working in startups with this type of support is high on the priority list for women working in the startup sector.

In the lead up to the Budget, the Government announced its ‘Digital Business Plan’, investing almost $800 million ‘to enable businesses to take advantage of digital technologies to grow their businesses and create jobs as part of our economic recovery plan’.

Notably, the Plan provides for $9.6 million to specifically support fintechs to export financial services and attract inward investment.

$25.1 million over five years from 2020-21 (including $3 million in 2024-25) to establish a Women in Science, Technology, Engineering and Mathematics (STEM) Industry Cadetship program to support 500 women working in STEM industries to complete an Advanced Diploma through a combination of study and work-integrated learning experiences.
The tax treatment of childcare does not support female founders or women startups.

Women with children and those who are primary caregivers are not incentivised to take on entrepreneurial roles because of how the family, parental leave and childcare benefit system is applied.

The Second Women’s Economic Security Package also includes $90.3 million over three years for concessional work test arrangements for paid parental leave in response to COVID-19.

For births and adoptions that occur between 22 March 2020 and 31 March 2021, parents will qualify for the paid parental leave payment if they have worked in 10 of the 20 months preceding the birth or adoption of a child.

This represents a step towards improving access to parental leave.

As you can see from the above, not all of the categories of support identified in our Report have been recognised in the Federal Budget; however, it is a promising step in support of women working in startups.

It should be noted that the Budget also contains a number of other measures largely tailored to support small to medium-sized businesses. The measures are focused on tax breaks, increasing the instant asset write-off and stimulating job growth.

Some of these measures, which may assist with improving outcomes for women in startups, are set out as follows:

  • Encouraging investment in research and development (R&D), through enhancements to the R&D tax incentive.Small companies with aggregated turnover of less than $20 million can access a tax offset of 18.5% above their company tax rate.

    Larger companies with aggregated turnover of over $20 million will benefit from committing a greater proportion of R&D expenditure by way of a reduction of the current R&D intensity tiers.

    As such, the non-refundable R&D tax offset will be determined as an 8.5% offset premium (for R&D expenditure between 0-2% intensity) or 16.5% offset premium (for R&D expenditure above 2% intensity).
  • Businesses with an aggregated annual turnover of less than $5 billion are able to deduct the full cost of eligible capital assets acquired after Budget night and first used or installed by 30 June 2022. Eligible capital expenditure will apply to new depreciable assets and the cost of improvements to existing eligible assets.

    Businesses with an aggregated annual turnover between $50 million and $500 million can deduct the full cost of eligible second-hand assets under $150,000 purchased by 31 December 2020 under the existing instant asset write-off.
  • Tax concessions that are presently available to small businesses with an annual turnover of up to $10 million will be extended to business with a turnover of up to $50 million.

    The concessions include immediate deduction for certain capital startup expenses, including raising equity or establishing a business entity. Eligible businesses will also be exempt from fringe benefits tax on certain items such as multiple work-related electronic devices provided to employees (ie phones or laptops) and staff car parking.

Only time will tell whether these measures will ultimately be sufficient to make a significant and lasting impact for women working in startups.  From our perspective, we anticipate that additional funding and support will be required from both government and private industry to encourage greater participation by women in the startup sector and to ensure their success.

If you would like to discuss any of the above measures and how they may impact your startup, please get in touch with Jacqui Barrett.

Contact

Jacqui Barrett

Jacqui Barrett

Partner & Head of US Practice

In the corporate space, Jacqui regularly advises and assists client with mergers and acquisitions, corporate structuring, corporate compliance and...

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