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In the Media: Australian technology innovators should have access to superannuation funds: Scott Farquhar
From the Sydney Morning Herald, 14/10/14 by Andrew Colley http://www.smh.com.au/it-pro/business-it/australian-technology-innovators-should-have-access-to-superannuation-funds-scott-farquhar-20141014-115p5c.html
Australian technology innovators should have access to superannuation funds: Scott Farquhar
"It is another disincentive to stay in Australia if you have a tech sector start-up.": Atlassian co-founder Scott Farquhar.
Scott Farquhar, chief executive and co-founder of successful software exporter Atlassian, says financial regulations should be relaxed to help start-ups get access to Australia's $1.7 trillion superannuation capital pool.
Addressing the KPMG J.J.C. Bradfield lecture in Sydney on Monday evening, the Sydney-based entrepreneur urged the federal government to do more to keep talent at home.
He said that only 0.0006 per cent of Australia's superannuation pool was invested in start-ups – about 350 times less than US super funds invested in new companies.
Mr Farquhar said Australia's new superannuation disclosure rules required funds to reveal excessive detail about their assets. He said the rules made it impractical for funds to invest in start-ups and exposed those companies to excessive scrutiny.
"Why with one of the largest superannuation savings pools in the world with almost $2 trillion under management do we not have superannuation funds invested in venture capital?" he said.
Under current Australian regulations, a billion-dollar superannuation fund that invested $10 million in a venture capital fund would be required to report the latter's assets down to as little as a $100,000 investment.
"I'm in huge favour of better disclosure. I think the government does a good job of setting that direction but this is complete madness and it would turn every venture-backed start-up into a quasi-public company having to report their valuation through to everyone in Australia."
Mr Farquhar proposed that the government place limits on the granularity with which superannuation funds were required to report of investments.
"It doesn't make sense to report something that's one-ten-thousandth of a fund's annual [investment] along with all the other accounting that has to get done. There should be a materiality clause below which they don't have to report," he said.
Paul Fletcher, parliamentary secretary to the Communications Minister and member for Bradfield in NSW, said the government would not support any change that would undermine the principle that a super fund's "sole duty" was to invest in the interest of maximising returns.
However, he signalled that there might be a place for a private mid-market investment vehicle for super funds to gain exposure to start-ups.
"It's not entirely clear that's something that the government can do anything about or whether that's an opportunity that's waiting for the right entrepreneur to come along," Mr Fletcher said.
Mr Farquhar also responded to reports that the government could as soon as Tuesday reveal long-anticipated changes to tax rules releasing employees from the obligation to pay tax on share options yet to vest – something for which start-up advocates have long lobbied in favour.
He said that the current tax laws requiring employees to pay tax on options before they're worth anything was stemming the flow of talent from large corporations to start-ups.
The US model of paying tax on vestment should be adopted.
"If we can't meet the world standard for doing that, how can we compete on a world stage?" he said.
Mr Farquhar's recommendations were among many for improving conditions for start-ups in Australia. He said Australia was lacking in software skills and the 457-visa scheme placed too high a bureaucratic burden on start-ups looking to attract talent on the global stage.
He also bemoaned a lack of attention to computer skills in school curriculums and said that the nation was trailing well behind its international counterparts.
He said, given the conditions, if he and co-founder Mike Cannon-Brookes were starting out again today, they would have gone to the US.