As expected, the federal government brought out some goodies in its budget last night — including a 2.5 per tax cut for small businesses with turnover of less than $50 million.

But in the fallout from the pre-election spending spree, one thing was abundantly clear: Australia’s tech and startup community was less than impressed.

Ahead of treasurer Josh Frydenberg’s first rodeo, the overriding theme among industry players we spoke to was a desire for the government to clarify its position on the R&D tax incentive for small business.

Under the current policy, companies with turnover of less than $20 million can offset R&D costs and claim the amount back as a cash refund.

The industry was hoping for two changes; first, to see funding for the incentive expanded, and also for some clarity around how large businesses can use it following last year’s shenanigans over CBA’s $100 million R&D tax claim.

Neither of those things happened.

‘Considering all the turmoil this policy has gone through, this could not be a worse outcome’

Instead, the pool of funding was reduced for the second straight year, and the government review into over-claiming was put on hold. In other words, everyone is now competing for a smaller pool of funds amid an environment of increased policy uncertainty.

“Whatever happened to Australia becoming the innovation nation?”, asked FinTech Australia GM Rebecca Schot-Guppy, perhaps summing up the industry’s sentiments.

“Access to the scheme consistently polls as the number one issue for growing a fintech in Australia. Now, fintechs will be forced to compete with major companies for a dwindling pool of capital,” Schot-Guppy said.

“Considering all the turmoil this policy has gone through, this could not be a worse outcome.”

Victor Zheng, co-CEO at online payments platform Assembly Payments, said the tax cuts for small business are short-term in nature and would only help “on a micro level”.

“Startups and fintechs on the other hand, are working to transform the way we do business and the way small businesses around the country operate,” he said.

“Investing in the startup ecosystem and industry will flow on to improve other areas of business. The government aren’t interested in SMEs, they are buying votes.”

Those sentiments were echoed by Carbar CEO Des Hang, who said the government’s policy indicated it now viewed small businesses and startups in the same basket, when in fact both industries have different needs.

“The R&D tax incentive gave us an incredible leg up in a global race to innovate. How are we supposed to compete with Silicon Valley and China now?” Zheng said.

On a slightly brighter note, StartupAUS CEO Alex McCauley highlighted the funding increase to the Export Market Development Grant (EMDG) as a positive step for the industry.

“We’re glad to see a significant level of additional support allocated towards helping businesses export Australian-developed goods and digital products overseas,” McCauley said.

However, he too highlighted the lack of clarity around the R&D as a significant backward step.

“Startups continue to be hammered by audits while the status of software under the scheme is in limbo. Uncertainty here is an existential risk for startups — it is critical to ensure that high-growth startups are unequivocally welcomed under the scheme as soon as possible,” he said.