Australia is in the midst of reviews and ideas generation. As part of the Rudd Government’s search for new ideas from the public, a review of the national system of innovation (‘the Review’) is now underway. The Review is a result of the Government announcing that it is seeking to ensure that Australia has a “new agenda for prosperity" through an innovation agenda to compete both globally and regionally for investment in innovation.
The Review was established in early 2008 with initial ideas submissions closing on 30 April 2008. The aim of the Government under the Review is to gain input from all sectors of the economy in relation to the 169 innovation programs including grants, Cooperative Research Centres (CRC) programs and the research and development (R&D) tax concession that are run at both state and federal levels. It was announced that 690 submissions have been received and those that are publicly available vary from comments on the public private sector links to suggested changes and greater support of the R&D tax concession.
The Federal Government is currently working on a Green Paper due by 31 July 2008, which we understand will contain a number of options about the future of innovation policy in Australia. We understand that it will include an overhaul of the R&D tax concession which is needed to ensure that it has a direct link to productivity in the economy (as it is a government support mechanism).
Positive changes that could be made to the R&D tax concession program should include the relaxation of the beneficial ownership tests in the program; increases in the base rate of the concession from 125 percent to 150 percent; the establishment of a centralised body to coordinate all programs, allowing companies to use a single portal when seeking government support and funding; and maintenance of the volume-based concession program, providing equal access to the support program for all companies across all sectors.
However, there are some concerning signals from the Government. Whilst the Minister for Innovation, Industry, Science and Research, Senator Kim Carr, strongly argues that “innovation drives economic growth, job creation, productivity improvement, new business formation and the regeneration of existing industries", the Government recently axed the Commercial Ready program (including Commercial Ready Plus and the Renewable Energy Development Initiative) with immediate effect from the night of the Federal Budget, and with no new applications accepted. This program provided 50/50 grant funding to Small to Medium Enterprises (SMEs) in Australia and was a $700 million program. At the same time, a Climate Ready program was announced with funding of $75 million which, whilst welcomed, is quite targeted and not available across the board.
The timing of the axing of the program provides most concern. It unexpectedly occurred overnight on 13 May 2008, despite the initial tentative findings of the Review being several months away in the form of a Green Paper. A final White Paper that may contain major policy change is not expected until late in 2008 or early 2009. It is hoped that the remaining Commercial Ready funding, now not being utilised over the next ten to twelve months in the SME sector, will be made available through enhancements to the R&D tax concession that are needed to at least maintain the level of innovation in the economy, and ideally to increase novel activity and attraction of global funds to Australia.
The next twelve months will be a critical time in innovation policy and the future of Government policy. If you currently access the R&D tax concession program, you know the benefits it provides by allowing greater cash flow through permanent and timing benefits to claimants. It would be prudent to consider preparing a submission when the Government calls for further submissions after the release of the Green Paper, either as a company directly or through your industry associations. These submissions are a means by which you can influence the next generation of innovation policy in Australia.
For further information, please contact your usual PricewaterhouseCoopers adviser, or:
Sandra Mason, Partner
Phone: +61 2 8266 0470
sandra.mason@au.pwc.com
