Federal Budget 2023: 5 things startups need to know

With the tightening of VC wallets and rising inflation, startups are feeling the crunch this year — and it's no surprise that many founders were looking to the 2023 Federal Budget to offer some relief. Thankfully, the Albanese Government has delivered with the latest budget, which provides much-needed support for startups across the country.

This year's budget includes a range of initiatives designed to support startups and encourage innovation, from a $392.4 million industry growth program to cash-flow relief in the form of halved PAYG and GST instalment increases.

Take a look at our latest updates from the Budget 2023 below. 

Want the full scoop? Read KPMG's 2023 Federal Budget Analysis, which deep-dives into the changes across different sectors and industries. 

Industry Growth Program: $392.4 million for startups and SMEs

Perhaps the biggest news for founders is the announcement of Labour's new Industry Growth Program, a $392.4 million program that supports startups to “commercialise their ideas and grow their operations.” The funding will be distributed over four years, followed by $79.2 million for each subsequent year. 

According to the Minister for Industry and Science Ed Husic, "This will enable emerging businesses to become the big employers of the future - backing our innovators with investment and advice so they can make the jump from brilliant idea to business plan to a growing enterprise."

What this means for founders: The path from idea to commercialisation is challenging at the best of times, which is why this program is incredibly beneficial for founders. With this funding, businesses operating within the priority areas of the National Reconstruction Fund will benefit from additional non-dilutive funding to take their product to market and build a thriving business.  

$101 million in investment to adopt AI and quantum technologies

Following the announcement of the First National Quantum Strategy at the beginning of May, the Federal Budget 2023 includes $101.2 million of funding over five years to support businesses to integrate quantum and AI technologies into operations. This funding will be dispersed across a number of initiatives, including:

• supporting the adoption of AI by startups to improve business processes and increase trade competitiveness,
• the expansion of the National AI centre,
• the establishment of a Critical Technologies Challenge Program that supports projects using “critical technologies to solve significant national challenges", with an initial focus on projects utilising quantum computing.
• the establishment of an Australian Centre for Quantum Growth to support the commercialisation of Australia’s quantum industry.

What this means for founders: If you weren't already using AI in your startup, this is the perfect incentive to do so, whether it's weaving AI into your product features or adopting AI to increase productivity and efficiency. However, it's unclear what it means when the Government says it will "support" the adoption of AI, so watch this space for more updates.

Halved PAYG and GST instalment increase

With cash flow cited as one of the key reasons that startups shut up shop, this initiative offers some much-needed breathing room for founders who are feeling the crunch.  

The Federal Government has announced it will halve the adjustment factor applied to Pay As You Go (PAYG) and GST instalments. The current 12% factor will be replaced with a 6% GDP adjustment factor for the 2023-2024 income year for those eligible to use the relevant instalment methods.

What this means for founders: More cash flow. By reducing quarterly income tax and GST payments, this initiative may help ease the financial burden for startups that are struggling to manage their expenses. 

Small business asset write-offs

The second initiative to improve cash flow, the Government has announced it will extend last year's small business asset write-off scheme for an additional one year, with a $20,000 threshold for businesses with a turnover of up to $10 million. This means startups can immediately deduct the full cost of eligible assets costing less than $20,000 provided these are installed and ready for use in FY24.

What's more, the $20,000 threshold applies on a per asset basis with no limit on the number of assets, allowing for the instant write-off of multiple assets.

What this means for founders: Even more cash flow, while lowering compliance costs and the complexity of managing depreciation over several years. Startups can take advantage of this policy by investing in eligible assets that may enhance their business operations and immediately realise a tax deduction for the full cost of these assets, freeing up cash flow and reducing tax liability. 

Changes to tax laws to reduce regulatory burdens

In some smaller but valuable time-saving updates, the Federal Government has announced that accountants and tax agents can file multiple Single Touch Payroll forms on behalf of clients from mid-2024, instead of employers having to complete the process themselves each month. Small businesses will also be granted up to four years to amend income tax returns from 1 July 2025, which makes it even easier and less time-consuming to make revisions to previous tax returns.

What this means for founders: Less time spent with your books in front of Netflix on a Friday night, and more time to grow your business. By reducing regulatory burdens, the Government is freeing up the time of founders and their teams to focus on what they do best.

Want to learn how to take advantage of the latest budget initiatives? Get in touch with us to see how you can leverage these changes to improve cash flow and secure additional non-dilutive funding for your startup.