Tax breaks crucial for investment in R&D

Tax incentives for both universities and industry to invest in research and development (R&D) are critical to Australia’s innovation agenda, says a leading expert.

Direct measures and tax incentives for universities to invest in research and development are critical to Australia's innovation agenda, said Professor Ron Johnston, executive director, Australian Centre for Innovation and International Competitiveness at the University of Sydney.

"Currently, there are no tax incentives to encourage companies to link with universities. The Australian Research Council (ARC) Linkage Projects scheme provides direct support, on a fifty-fifty basis, but the cumbersome and slow processes are a substantial barrier to company uptake," said Professor Johnston.

Research Australia CEO, Elizabeth Foley, is supportive of an R&D tax incentive. "While there is currently little hard data about the effects of the R&D tax incentive, there is significant anecdotal evidence that this incentive has helped accelerate research and commercialisation in the biotech and medical devices sectors," says Foley.

Nigel Hennessy, principal and chairman at corporate advisory firm CtechBA, said that innovation remains one of the greatest challenges for boards who find it difficult to balance long term interests with short-term priorities.

"Boards, like many at the operational level, get caught up in the trap of thinking about the day-to-day without giving proper consideration to the future need to innovate," said Hennessy.

"However, this is a critical governance issue which goes to the very heart of a board's role to offer strategic guidance and oversight.

"Tax breaks, along with a mix of other government policies and support could play an important role in assisting business, and particularly NFPs, in prioritising innovation."

Professor Johnston adds that, for most advanced innovative countries, direct measures have been more effective than a general tax break, such as on research and development (R&D) investment.

"Direct measures might include subsidies for companies entering into designated priority areas, for example, in Europe, this has increased sustainability in energy, materials, construction and waste management."

The Government has previously acknowledged a weakness in the level of collaboration between Australian universities and primary research centres and industry, and has flagged that taxation will be in the mix when it releases its innovation statement in mid-December.

According to Innovation Minister Christopher Pyne, it will be a "game changer in terms of Australia's cultural understanding of the role science and research can play in innovation".