Tag Archives: government innovation expenditure

R&D

R&D tax investment takes a hit

The biggest loser appears to be the R&D tax measures for business, reducing from $2.8b to $2.3b, a fall approaching 18%. Some care needs to be exercised as the comparisons given are not final figures; they are the estimated actual figures for 2017-18 and the budget estimate figures for 2018-19. Furthermore, the R&D tax measures are not actually government spending but are revenue foregone by the government, which is perhaps more difficult to estimate.

The full impact of changes to the R&D tax measures are yet to play out. The Ferris, Finkel, Fraser Review of the system was announced as part of the NISA statement in December 2015. The reviewers were asked to “identify opportunities to improve the effectiveness and integrity of the R&D Tax Incentive, including by sharpening its focus on encouraging additional R&D spending”.

The review panel found that the R&D tax measures fell short of meeting their objectives of additionality and spillovers. They recommended six changes, which have been the subject of considerable debate since the public release of the report in September 2016. A “collaboration bonus” recommendation was not taken up, although a number of advocacy groups have continued to press the case. On budget night this year, the government announced a range of measures to “refocus” the R&D tax measures. The refocusing included a crack down on R&D tax claims that push the boundaries of the arrangements, with enhanced integrity, enforcement and transparency arrangements. A consultation process closed 26 July and the final form of the legislation is expected to come before the current parliament.

What we currently know is that the government expects a significant reduction in the total cost of the R&D tax measures from 2017/18 to 2018/19. What we don’t know is how much the reduced expenditure is due to actual reduced R&D spending by companies or whether savings from the crack down and enhanced enforcement are having a great impact. While one still hears horror stories of tax claims for “R&D” that looks far more like business as usual, most of the stories haven’t changed that much from the last big reforms in 2010. Obviously no government wants to provide incentives to companies to simply do what they would have done regardless. Getting that balance right is the key to tax measures for R&D and it will remain a closely watched space over the coming year.

While indirect R&D support to business may be reducing, the direct mechanism through the CRC Program is doing relatively well. Budget figures show an increase of over $30M in the annual allocation to the program over the forward estimates, rising to $192M in 2021-22. The increase is much needed, as it brings the program back toward the level it enjoyed a decade ago. The introduction of the extremely popular CRC-Projects comes from the same budget and they continue to build momentum with business. Demand for CRC-Ps is growing substantially and companies enjoy the simplicity of the grants which foster collaboration between businesses and between business and public research organisations.

The Science, Research and Innovation Budget tables can be viewed here.

– Tony Peacock

Originally published by the Cooperative Research Centres Association.

Making innovation work

The ubiquity of the term, ‘innovation’ in the Australian political, business and social lexicon risks diffusing its meaning and, worse, its broader uptake in the national interest. Identifying the true meaning and value of innovation requires we significantly rethink the way we approach the generation of ideas and their application into society.

The current transactional approach to innovation in Australia generally eschews direct supports in favour of tax incentives which, unusually in a global context, comprise roughly 90% of government expenditure on innovation. This is like a vending machine approach to innovation, one in which all attention is focused on the end product and little or no concern is directed towards understanding, or better still, enabling and improving the mechanics of its delivery.

If we are to be more expansive and impactful in our approach to innovation then we need to engage it in its fullest sense and not just concern ourselves with input and output triggers. This requires we focus on identifying the factors that both comprise and, more importantly, help create successful innovation ecosystems.

making innovation work
Prime Minister Malcolm Turnbull visits Western Sydney University’s LaunchPad – an initiative to support startups and technology based businesses in Western Sydney. Credit: Sally Tsouta

Strengthening literacy in science, technology, engineering and mathematics (STEM) disciplines from a very early age affords us a bedrock on which to build workforce capacity and the intellectual capital necessary to generate and sustain innovation. Existing educational structures will need to adapt and change in a way that both responds to and supports the highly fluid and dynamic features of a thriving innovation ecosystem. Adjusting curriculums or modifying our expectations of graduate attributes, while important exercises, will not get us to where we need to be.


“The development of the skills-base required to drive sustainable innovation will both depend on and necessitate a very deliberate blurring of the borders between business, industry and education.”


According to last year’s ‘New Work Order‘ report by the Foundation for Young Australians, “70% of young Australians currently enter the workforce in jobs that will be radically affected by automation”. Add to this an expected average of 17 job changes for each of these new workers over the course of their working lives and it is clear that career narratives within the mooted ‘Ideas Boom‘ will be conditionally diverse and non-linear.

Disrupted, diverse and adaptive career pathways demand innovative responses from business as well as the education sector. The development of the skills-base required to drive sustainable innovation will both depend on and necessitate a very deliberate blurring of the borders between business, industry and education. The key to making this work is not so much an exercise in imposing demarcations on the role each of these groups perform collectively, rather it is centred upon letting go.

When circumstances conspire, Australia’s public research entities and business can produce remarkable innovations, as is evidenced by world leading inroads in, for example, solar technology, quantum computing and medical research; but we need to rely on more than circumstance and a dwindling linkage and research infrastructure funding pool.

While it is early days, universities and business are – in incubator, accelerator, and shared strategic (precinct) spaces – forming the beginnings of the deliberately diffused collaborative relationships needed to build sustainable innovation ecosystems. Encouragingly, the policy and funding frameworks put forward by the National Innovation and Science Agenda offer much to support this process.

The real determinant of our success in innovation will be the aspirations and behaviours of the emerging generation of workers. Diversity in career experience will be the attractor to study STEM disciplines, not curriculum reform. If we get it right, STEM skills will be seen as essential navigation tools in an as yet unknown adventure through a thriving innovation ecosystem where business, industry and universities coalesce to disrupt, diffuse and diversify in the interest of ideas.

Professor Barney Glover and Dr Andy Marks

Vice Chancellor and President of Western Sydney University Assistant Vice Chancellor (Strategy and Policy) of Western Sydney University 

Read next: Dr Cathy Foley, Deputy Director and Science Director of CSIRO’s Manufacturing Flagship on the Path to a ‘right-skilled’ workforce.

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