Many tech workers and entrepreneurs leave Australia for Silicon Valley, and while for many it’s not the end game, employee share option scheme reform is key to luring them back, according to Xero managing director Chris Ridd. The Australian Consulate-General in San Francisco estimates more than 22,000 Australians are working in the United States and the Valley in particular. Ridd can relate. About 20 years ago when working for a large multinational he had the opportunity to leave Australia and work in Silicon Valley, but would eventually return and is now based in Melbourne. “I think it would be a shame if we had a situation where great talent in Australia and New Zealand felt they had to go to Silicon Valley to pursue career goals and get traction with an idea. But the reality is a lot go over there and come back,” Ridd says. “From my perspective and a lot of people I talk to (that move abroad), the US is not the end game but can be part of furthering your career. But Australia is a cool place to live and we’ve got a lot of innovation here. “So you can pick up some great skills and experiences and bring that back, that would be my hope.” That said, there must be incentive for talent to return to Australia and a big part of that relies on employee share option scheme legislation reform. The startup industry has been lobbying for some time for the government to roll back changes made to the legislation in 2009 which made employee share option schemes essentially unworkable for startups. The government has since promised to introduce new legislation, but has been criticised by Freelancer CEO Matt Barrie and Atlassian founder Mike Cannon-Brookes as it would only apply to companies with less than $50 million turnover. Ridd says when he moved from Microsoft to take a job at Xero, a big part of the appeal was the New Zealand-based company was able to offer an employee share scheme. “I took a 50% pay cut when I joined Xero. What got me on board was the act that they were able to offer equity. Equity is a huge value proposition when you’re in startup mode,” he says. “The only option you have at your disposal to attract people from large corporates that have a lot of experience is to offer equity, and to put a tax regime on top of that, that makes it less attractive is insane.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
That Startup Show, the Melbourne-based web series aimed at the startup community, has announced the line-up for the final instalments of its premiere season. The panel of experts for the final four instalments include chief executive of Shoes of Prey Jodie Fox, Chris Ridd from Zero, chief executive of Thankyou Water Daniel Flynn and country manager of Airbnb Sam McDonagh. Hosted by comedian and tech commentator Dan Ilic, the show focuses on the Australian startup ecosystem and the issues facing local entrepreneurs. The aim is to bring together entrepreneurs, incubators, investors and creatives to celebrate all things innovative. Since the pilot episode launched on YouTube in August, the web series has attracted more than 110,000 viewers across Australia, Europe, Asia, Canada and the United States. That Startup Show recently announced funding from angel investor Alan Jones and technology foundry Digital4ge. The capital injection will allow the production to complete the remaining episodes for 2014 and build an online platform. Series co-founder Ahmed Salama told StartupSmart the premiere season was really about validating the concept and the response to the series so far has been overwhelmingly positive. “That’s only going to help us expand and grow even more,” he says. “We’ve got a few exciting things planned for next year. Our vision is to grow this show beyond a show and into a platform to give a voice for startups not just in Australia but around the world. “For us to do that, we have to take it to the next level and mature the show into the platform it can be. We look forward to doing that.” The final four episodes That Startup Show for this season will be filmed live between Monday November 24 and Thursday November 27 at The Savoy Tavern in Melbourne. Tickets are available here. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Cloud accounting company Xero has hit monthly recurring subscription revenues of $NZ8.6 million ($A7.93m), passing $NZ100m ($A92m) in annualised revenue for the first time. Full year operating revenue to March 2014 was $NZ70.1m. Xero CEO Rod Drury says passing the $NZ100m annualised revenue mark is a huge milestone for any tech company. “We’re so proud to have got there so quickly,” he says. Xero has also announced it is expanding its presence in Australia with a new office opening in Canberra and the hiring of additional staff. Staff numbers in Australia now total 144 across five offices. Xero says in a statement that it is committed to creating employment opportunities in Canberra, at a time when many public sector jobs are under threat in the ACT following this year’s federal budget. “We see the value in investing in our ACT Partners and customers, and continuing to grow our presence in the region” said Chris Ridd, managing director for Xero in Australia. “We are dedicated to providing localised support across Australian business hubs, such as the ACT, that have shown a real eagerness to adopt cloud-based accounting software.” Xero’s new Canberra office will open on Monday, June 16 and will be located at 10 Rudd Street, Canberra.
Did you know you can claim for cleaning costs and wear-and-tear on your furniture at your home business? As the name suggests, a home-based business is one where you operate the business at, or from, home. That said, you don’t have to do your work at home to be a home-based business. For instance, a house painter would do most of their work elsewhere, but if they didn’t rent or own premises other than the home, they would count as a home-based business. Generally speaking, a home-based business can claim all the deductions any other SME can; yet there are also some specific deductions to be aware of. There are broadly two types of expenses you can claim related to your home business area: occupancy expenses and operating expenses. Parts of the home you use for business Occupancy expenses include rent or mortgage interest, council rates, land taxes and home insurance premiums. Before you can claim occupancy expenses, you have to pass the Australian Tax Office’s interest deductibility test. This means you must have an area of your home set aside exclusively for your business activities, such as an office or workshop. When assessing this test, the ATO will consider factors including whether you have a sign identifying your business at the front of your house; whether or not the business area is also suitable for domestic purposes; and whether it is used regularly for client visits. If you pass the test you can claim the proportion of your home mortgage or rent which corresponds to the amount of space you use for your business. For instance, if the floor area of your home office or workshop is 15 per cent of the total area of your home, you could claim 15 per cent of your rent or mortgage interest, council rates and insurance. There’s a potential sting in the tail you need to be aware of before you start deducting a portion of your mortgage. You might have to pay capital gains tax on the sale of your home if you pass the interest deductibility test. This can apply if you ran a small business from home, even if you never claimed; the issue is how much you transformed your home into a place of business. Operating expenses: the costs of doing business You can claim a deduction for any expenses in running your home business that are above the costs you would have incurred by living in the home. Running costs include electricity and gas for heating, cooling and lighting; phone and internet costs; the decline in value of plant and equipment like chairs, bookcases and computers; as well as the decline in value in furnishings like curtains, carpets and light fittings. Cleaning costs are also deductible. Like claiming the mortgage or rent, you can only deduct these expenses for the portion of your house that you actually use for your home business – and there are different ways of working this out. You can calculate this figure using the floor area of your home office. For instance, if the floor area of your home office is 10 per cent of the total area of your home, you can claim 10 per cent of electricity costs. This is the simplest method, but if you don’t have an area set aside for home use only, you’ll have to use another method and you must be able to show how you calculated your deductions. If you get audited, the ATO will want to see that the claim is fair and reasonable and excludes the expenses associated with normal living costs. It’s a good idea to keep a diary for a four week period to demonstrate how use of your work-at-home office has increased your expenses, particularly your phone bill. Another alternative is to claim a deduction of 34 cents for every hour you work at home. This method, however, covers only heating, cooling, lighting and furniture depreciation, and you will have to work out other expenses such as phone and internet usage separately. Don’t forget wear-and-tear You might be able to claim a deduction for the decline in value of some of the assets used for your business, such as computers and other office equipment, electrical tools and motor vehicles, as well as furnishings, carpet and curtains. As with other deductions, you can only claim the proportion used for business, so you should also record business and non-business use of these assets in a four week diary. Chris Ridd is MD, Xero Australia
The end of the financial year is fast approaching and small businesses need to get their tax affairs in order. Chris Ridd of online accounting software provider Xero outlines strategies to help your business minimise its tax bill. Tax time takes it out of the best of us. A small saving grace is the general rule that you can claim deductions for any expense your business incurs while generating its income. Many of these deductions are straightforward – rent, materials, wages, supplies – but here are five you might not have heard of. Interest – don’t overlook what you can deduct You can deduct any interest on money your business borrows, including interest paid on business loans, overdrafts and other finance facilities. This might sound obvious, but there are other interest expenses you can deduct that can easily be overlooked. Firstly, any interest that is accrued on a business loan but not paid by June 30 is potentially deductible. Secondly, many small business owners fund their business through personal loans or with their personal credit card. And because the interest costs aren’t being incurred by the business itself, but by the business owner, you can claim a deduction on the interest in your own personal income tax. Depreciation – take advantage of the $6500 cap Small businesses shouldn’t forget to claim for depreciation – getting a deduction for the loss of value and wear and tear on the business’ assets. Assets usually have to be depreciated bit by bit over several years, but special rules for SMEs mean that they can get an immediate tax write off for any asset with a value of up to $6500. For example, if your business bought a $4000 computer in the current tax year, the business could claim an immediate 100% tax deduction when you do your tax return. The federal government has signalled it wants to drop the limit to $1000, backdating the change to 1 January 2014. This denies SMEs to take advantage of this concession before it goes out the window (although it remains to be seen if this change will be passed by the Senate). Nonetheless you can, at the very least, take advantage of the $6,500 cap for assets purchased before 31 December 2013. Motor vehicles – drive a better deal with the tax man There are also generous depreciation concessions for small businesses when they buy motor vehicles. SMEs can depreciate cars, trucks or vans and so on more quickly than other businesses. They receive 100% deduction on the first $5000 cost of the vehicle and can then depreciate the rest at 15% in the year they bought it. So a $14,000 car would attract a tax deduction of $6350 in the year of purchase. (If the vehicle cost less than $6500, the whole amount can be claimed as an immediate deduction under the instant asset write-off provisions outlined above.) But, as with the general depreciation rule, the government wants to remove these concessions; the initial deduction on a $14,000 car would then drop to $4200. But, as with the general depreciation rule, the government wants to remove these concessions and backdate them to 1 January. If this happens the initial deduction on a $14,000 car would drop to $4200. Trading stock – profit from your losses Tax time is a good opportunity to do a stocktake to see if you qualify for any deductions on your trading stock – anything you produce, manufacture, purchase for manufacture or sell for your business. You can write off any lost, damaged or obsolete stock for a tax deduction. If your stock level changes by more than $5000, you must take into account the change in value of your trading stock when you work out your taxable income for the year. If the value of the trading stock is higher at the end of the year than at the beginning, then the rise counts as part of your taxable income. But if your stock is worth less you will qualify for a deduction. There are three different methods of valuing stock: the price you bought it for; its current selling value; and its replacement value. You can choose which you use for which piece of stock, giving you the opportunity to maximise your deductions. Bad debts – there is some good news It’s always bad news for a small business when debtors fail to pay for the goods or services you’ve sold them. But at least there’s a small silver lining – you can claim a tax deduction for the bad debt. A bad debt is any debt which has been outstanding for 12 months or more and which you have made a reasonable effort to recover. It pays to go back through your outstanding invoices to find bad debts and write them off before the tax year on June 30. Also, if you calculate your GST on an accrual basis, don’t forget to claim a refund for the GST you paid to the Australian Tax Office when you issued the original invoice. So there you have it: five small business tax deductions to start looking at before the end of the financial year. Chris Ridd is managing director of Xero, an online accounting software provider which helps small businesses get their financial affairs in order. This article was updated after changes were announced in the budget.
Ollo Mobile has won a trip to Silicon Valley after beating nine other start-ups in the Small Team, Big Impact competition in Sydney last night. The pitching competition was coordinated by cloud technology computing company RackSpace. Ten start-ups with fewer than 10 team members were selected to compete. Ollo Mobile is a new device and system for panic buttons, which elderly or unwell people can use to alert family members and health authorities when they need help. The other finalists were OpenLearning, Food Orbit, Projectia, Annexium, AuthoPay, Revolutionise, Clipp, Digital Sorbet and Geepers. The start-ups pitched to a judging panel of Mick Liubinskas from incubator Pollenizer, Kim Heras from start-up network PushStart, Ruslan Kogan from Kogan Electronics, Chris Ridd, the country manager from Xero, and Robert Scoble, Rackspace’s international start-up liaison. Scoble told StartupSmart he was excited to see an ecosystem beginning in Sydney, but Australia needed to do more to support entrepreneurs. “San Francisco and New York have ecosystems, as do Tel Aviv, Beijing and Seattle. London kind of has one and Los Angeles is being built. It looks like Sydney has a good one underway. These ecosystems need to keep the geeks in town, or they leave and go somewhere else,” Scoble says. Despite the growing ecosystem, Scoble cautions Australian struggles with employee share schemes (ESS) are a fundamental issue that needed to be overcome quickly. “The laws here aren’t letting start-ups use their stock options and equity to motivate people to shelve their jobs at big companies and come and join start-ups,” Scoble says. “Australia needs to deal with this quickly to support your entrepreneurial talent, or they’re going to leave and take their value with them.” The federal government announced a review of ESS opportunities in June. Scoble adds start-ups need access to money, talent, public relations and business expertise to get their companies to the point they’re turning over billions. “When you’re in San Francisco there is such a strong future culture, you can see it in the streets with people trying new things,” he says. “You need access to the idea that your plans are possible and a city with a great culture that encourages that.”
The US-founded Startup Grind event series continues to grow in Australia, with the Sydney and Melbourne chapters set to host the founders of Atlassian and Zendesk respectively.
Reckon is aiming to shake up the Australian accounting software market when it launches its first cloud-based product Reckon One in the next quarter.
Accountancy software company Xero has raised $15 million to fund global growth and has made its first acquisition for the year, snapping up Max Solutions in a deal worth almost $5 million.
Australian tech start-up Paycycle, which provides online payroll services, has been snapped up by accountancy software firm Xero for $1.5m, just two years after the company was launched.