News and Research | AusGrant - Leading R&D Grant Writers - Part 7

Malcom Turnbull is pursuing universities to turn research ideas into cash as part of his innovation agenda for Australia. Today it was announced that the Prime Minister has called a meeting on Friday aimed at finding more ways to drive industry collaboration  with Universities.

Previously, the government has included incentives to push researchers in co-operative research centres to focus more on commercial outcomes. For example, through the ‘Advanced Manufacturing Growth Centre’ chaired by former IBM Australia chief executive Andrew Stevens and ‘The Innovation and Collaboration Centre’ co-founded by UniSA, Hewlett Packard and the South Australian Government. However, despite this, when compared to other countries our researchers are not transferring to a commercial environment.

Mr Pyne, the Science and Innovation Minister, stated that there needs to be a cultural shift in Australian researchers. According to Mr Pyne,  many researchers believe that, “once your research is done your job is done” and ignore the commercial possibilities that come after that. This is reinforced by the fact that only 4 percent of our researchers in public institutions are involved in business.   With the Turnbull government’s innovation agenda creating positive buzz around Australia, it will be interesting to see how the government plan on turning research ideas into cash and commercialising the process.

Certainly, time will tell how the government plans on increasing the Australian landscape to be more innovative and collaborative. Those invited to Friday’s innovation meeting have been told little about the agenda, which is expected to be open and informal. Is it just a matter of including more generous tax breaks and incentives, or a matter of a simple culture shift?

In a recent report by PWC it was revealed that technology based start-ups are predicted to be worth over $US109 billion and have the potential to create 540,000 jobs by 2033. In light of this, and with Australia’s agenda for innovation backed by the Turnbull government, policy recommendations have been affluent.

Several companies and investors have pitched the idea of adopting the UK Scheme for tax breaks and R&D credits. For example, STARTUPAUS has recommended doubling R&D tax concessions and adopting the UK’s successful Seed Enterprise Investment Scheme (SEIS), by generating income and capital gains tax incentives for early stage start-up investments to support their growth and overall economic influence.

On the other hand, Dr Graeme Wald, Biosciences Managers’ investment director, noted that further incentives are required for R&D. In Dr Wald’s opinion, Australia should consider emulating Britain’s tax breaks on revenues earned from patents. Indeed, incentives would assist in improving the angel investing landscape in Australia.

By observing the success of the UK market, one can see the effect the government can have on driving the start-up ecosystem by creating local jobs and a culture that embraces an agile, innovative economy.  For instance, the UK government has increased R&D tax credits to 225 percent, which is comparable to Australia’s 150 percent for companies earning less than $20m. As a result from boosting the R&D tax credits, the UK’s R&D expenditure has increased by 40 percent.

It can be seen from the above breakdown that Australia’s economy is at a vital juncture. A new prime minister coupled with a contemporary innovation agenda, means we have the potential to build an innovative economy that is proficient at taking advantage of the vast opportunities technology is generating. Whether it is taking notes from the UK, or creating our own set of policies, the future for our economy is looking bright as it takes strides towards an innovation focus.

The newly announced Entrepreneurs’ Infrastructure Program will focus on providing support for businesses via three funding streams.

Stream 1: Business Management 

Allocated Funding: $207 million over four years

The first stream will help CEOs and managers “take time out to work on their business rather than in their business”.

With the help of advisors from the private sector businesses will develop plans for improvement and there will be access to limited funding to bring in additional specialists.

Stream 2: Commercialising Ideas

Allocated Funding: $141 million over four years

The second stream will provide a range of tailored commercialisation services designed to provide entrepreneurs and innovative businesses access to advice connection and support, to hence their prospects of commercial success.

Stream 3: Research Connections

Allocated Funding: $26.6 million over four years

The third stream will assist businesses understand the value of research, how to engage a researcher and how to negotiate agreements.

Receiving an AusIndustry ‘Request for Further Information’ (or RFI) can be a daunting thing. The important thing to remember that all companies at some point in time will be monitored through the AusIndustry Compliance Continuum. The RFI is just one of the way’s for AusIndustry gather information for this purpose, so there is no need to panic.

As the R&D Tax Incentive is a self-assessed claim, AusIndustry issues RFIs to ensure that all companies claiming the incentive remain accountable for their claims. It is an important aspect of the legislation as it requires each company claiming the incentive to really consider whether their activities are in fact experiments, are producing a new or improved product or process, as well as producing new knowledge.

Another important element that AusIndustry are looking for is whether the company claiming the R&D Tax Incentive has contemporaneous records of their activities. A recent decision by the AAT (NaughtsnCrosses Pty Ltd and Innovation Australia) clearly outlined the requirement for companies to have documentation to show:

1. that the activities being claimed actually occurred; and
2. that the activities followed the experimental process of hypothesis to experiment, observation and analysis, leading to conclusions.

This requirement can scare some companies into thinking that the only eligible activities are those carried out by people in white lab coats who write scientific papers about their experiments. However the fact is that experiments occur in a wide range of settings and the contemporaneous documentation required could include internal emails, minutes from meetings, design sketches, logbook records, or photos of a prototype.

Nevertheless, it is imperative that your company is prepared for the event of an audit if you are claiming the R&D Tax Incentive. We have devised a simple checklist to help you ensure that your business knows exactly what is required when AusIndustry come knocking…

• Audit Checklist – General

• Audit Checklist –Biotech

• Audit Checklist –Manufacturing

• Audit Checklist – Mining

• Audit Checklist – Automotive

• Audit Checklist – Electrical Engineering/ Software

As a registered tax agent firm, AusGrant can assist you at all levels of the R&D tax audit process.

To learn more, Click here to contact your local AusGrant representative.

The Small Business Advisory Services (SBAS) program last week announced 62 successful organisations that received funding offers for up to two years.
Established in the 2008 Budget, the Small Business Advisory Service has provided more than 392,000 separate advisory services to more than 207,000 small businesses around Australia.

Red More

NSW Farmers president Fiona Simson has urged the government to commit to further investigation of business support options for farmers to ensure the new national package of drought programs delivers better outcomes than the existing one.

Ms Simson spoke positively about recent discussions with the government on household support for farmers but was disappointed that business support was failing to attract the same attention.

See full report

The R&D Tax Incentive will remain intact after the Business Tax Working Group failed to find a solution to produce a revenue-neutral way to cut Australia’s corporate tax rate.

The Government funded working group was established last year and asked to provide the government with recommendations on how to improve the business tax system.

A draft report released by the Working Group in August made several suggestions as to how the corporate tax rate could be cut, including a controversial reduction to the R&D Tax Incentive introduced in July this year. However, while the working Group agreed that a reduction of 2-3 per cent in the corporate tax rate would benefit the economy, they could not produce a solution to fund the cut while remaining revenue-neutral, therefore sparing the R&D Tax Incentive.

82 entities made submissions to the working group, many of which rejected one or all of the options suggested. The Australian Chamber of Commerce and Industry rejected all cuts to concessions and recommended that the funding come from a reduction in government spending.

Shadow Treasurer Joe Hockey said the task set by the government was impossible. Mr Hockey said for the tax cuts to be genuine cuts, they are to come from savings within the budget.

However, this seems unlikely to occur in the immediate future as Treasurer Wayne Swan announced that he remains supportive of lower company tax rates in the future, if a consensus can be reached regarding how to fund these cuts from the existing business tax system.