The $1.2 billion expansion to the government’s digital strategy is set to make it easier for small businesses and startups to depreciate intangible assets such as software, designs and intellectual property.
It’s a move that acknowledges the importance of tech and tech investment in the post-COVID-19 economy. And it’s a realisation of a measure small businesses have been crying out for for years — one that could be of considerable value.
Announced ahead of next week’s federal budget, the suite of measures are being touted as an investment in tech-enabled economic growth, with Prime Minister Scott Morrison acknowledging in a press conference that “every business is a digital business”.
The measures will include “changes to the way Australian businesses can claim depreciation of intangible assets like intellectual property and in-house software,” a statement said.
There will also be $100 million for digital upskilling, $124 million for investment in AI adoption, tax offsets for the gaming industry and funding to expand the government’s digital small business advisory service.
But arguably it’s the tax offset allowances for intangible assets — reported to come at a cost of $170 million — that are most indicative of a sea change here.
And this is something the small business and tech communities have been calling for for some time, ever since the government introduced the $20,000 instant-asset write-off scheme back in 2015.
That scheme allows for depreciation of assets like work vans and cafe kitchens; basically, anything used by a business for income-generating purposes.
But, it has always excluded intangible assets such as software licences — things that are becoming increasingly important not only for tech companies but for all businesses, and particularly over the past 12 months.
It’s a measure that will be welcomed by the startup community, which often have very few ‘tangible’ assets to their name. What is of value to them is intellectual property, the intangible tools they’re building and even the expertise of their staff.
We should note that full details are not available yet. We don’t have an exhaustive list of what is to be considered an intangible asset under the new strategy.
Equally, the measure is not expected to come into effect until July 1 2022, after temporary ‘limitless’ tax deduction measures — which were implemented to help support SMEs in the COVID-19 recovery but don’t cover intangible assets — come to an end.
The measure will be welcomed as a positive step forward, and a suggestion that the government is sitting up and taking notice.
Rebecca Schot-Guppy, chief executive of FinTech Australia, said the whole announcement signifies “a shift in thinking in how technology buoys our economy”.
And Morrison is right in saying there is no business that isn’t digital. Software spend is not just for startups, and whether they’re hosting a website, signing up to a payments platform, using HR and accounting software, or patenting your product, there are surely very few businesses out there that are not spending on anything intangible.
Speaking at a press conference today, digital economy minister Jane Hume said it’s “time to make that next great productivity leap”.
We know Aussie small businesses and startups are innovative, nimble and creative. They’ve already taken that leap, or are more than ready to.
We’re just happy to see government policy catching up.