Budget 2015 – Any love for Innovation?

The 2015 Budget sees no hugely significant changes to innovation funding. The flagship R&D Tax Incentive remained untouched, whilst funding for various research initiatives was either slightly cut or slightly bolstered. The government’s focus is largely on SMEs in the latest budget – a step in the right direction some say, as innovative start-ups are included in this category, however the measures fall short of directly addressing innovation growth as Australia’s economy transforms into one that is knowledge-based.

As outlined by the latest Australian Innovation Systems Report (produced by the Office of the Chief Economist), Australian innovation is being hampered by a shortage of required skills and a lack of collaboration and innovation in management culture. Unfortunately, it does not seem that the latest Budget addresses these issues directly.

Impact on the R&D Tax Incentive

Though the last two years has seen the R&D Tax Incentive (Incentive) poked and prodded by various sides of the political spectrum, no additional changes were announced in the 2015 Budget handed down last Tuesday night.

Since February 2013, two major iterations to the program have been proposed – a 1.5% cut to the offset rates offered under the Incentive and removing access to the program for companies with a turnover of more than $20 billion per annum.

The 1.5% reduction was formally rejected by the Senate earlier this year, an outcome welcomed across all industries.

The proposal to restrict companies with turnovers of more than $20 billion from claiming under the Incentive was instead replaced by a $100 million cap on eligible expenditure, thanks to a deal struck with the Palmer United Party. These changes will be applied retrospectively from 1 July, 2014.

Impact on Innovation growth

Though the Incentive remained untouched, there was some movement in other areas of government innovation funding.

There were also numerous measures introduced to encourage the growth of SMEs, with a particular focus on start-ups for, some may say, the first time in any budget. These measures include:

  • Encouragement of crowd-funding through proposed easing of capital raising laws
  • Scrapping of Capital Gains Tax payments when changing company structures (i.e. to Pty Ltd)
  • Ability to immediately deduct fees associated with initial company set-up
  • Instant asset write-off for purchases up to $20,000 (if turnover is <$2 million)
  • Whilst these are not explicit innovation funding measures, it is hoped they will assist in extending the runway for smaller companies and start-ups that are at the core of Australia’s innovation growth.

The Entrepreneurs’ Infrastructure Programme (EIP), introduced in last year’s budget in a bid by the Government to provide more ‘practical’ assistance to businesses, saw a $27 million cut as a result of a slow start to the initiative. Our own research has shown that those eligible to participate in the EIP either don’t fully understand the ultimate benefits of the program or view the process involved as too daunting, complex and/or time consuming. Furthermore, Co-Operative Research Centres (CRC) – not-for-profit organisations supporting collaboration between researchers and industry – saw funding cut by $29.8 million.

Both the EIP and CRC cuts are an interesting move for a government that has seemingly been attempting to build a stronger bridge between innovation and commercialisation.

It’s not all slashing however – the National Collaborative Research Infrastructure Strategy (NCRIS) received an extra $150 million of funding for its researchers Australia-wide. Furthermore, the Australian Synchrotron – a world-class radiation research facility – was given an additional $13 million in funding.

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May 19, 2015.

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