June 19th, 2023
Former Labor Government senator and industry minister Kim Carr authored an opinion article in the AFR on 18 June 2023 titled “Has Labor written off its promise to supercharge R&D?”
Notable points in the article include:
- The Labor Party’s stated policy aim is to lift R&D expenditure from 1.8 per cent of GDP to 3 per cent by 2030. That is an appropriate ambition. In fact, it has been Labor policy since 2014. But we are going backwards;
- The challenges are not all about money. In Australia, our national innovation system lacks the cohesion, co-ordination and program scale of other advanced economies.
- Our single largest instrument for R&D support is the tax incentive, but it has not been overhauled despite clear and sage advice from some of the most respected experts in the country. Nor will it be touched by any of the reviews running in the education system.
- The productivity of our economy and our capacity to solve problems and build things will depend on our science and research capacity.
- As a country, we need a whole-of-government, root-and-branch national inquiry into how we can lift our R&D performance. Such an inquiry could emulate and build upon the best international experience that we’ve seen from the British, the Canadians and the Americans.
- Such a review into the innovation system would be timely, especially if we seek to achieve the kinds of productivity gains that Treasury has built into its forecasts in the latest budget
- The Sustainable Research Excellence (SRE) initiative provided $500 million for three years in the 2009 budget. Eighty per cent of this was contingent on universities undertaking transparency costing audits, as well as meeting specific performance targets. Twenty per cent of this funding went to all universities on a formula-based allocation. This program was suspended, and it needs to be re-established.
Swanson Reed agrees with some of Kim Carr’s points and recognises him as a great contributor and advocate of local industry and manufacturing.
A review of Australia’s productivity and innovation system may be worthwhile, and some minor changes to the R&D Tax Incentive may have merit, including:
- A collaboration premium rate of R&D offset for R&D expenditure incurred by companies engaging universities; or
- Increasing the decade old $20M threshold for access to the refundable offset component of the R&D Tax Incentive.
In addition, policies that increase productivity and business access to suitable resources and talent may also contribute to increased investment in R&D.
However we disagree with the need to conduct a detailed review and overhaul of the R&D Tax Incentive.
The R&D Tax Incentive has been subject to a number of reviews and actual and proposed changes since its introduction FY12, including a substantial overhaul of offset calculation rates in FY22.
Another review or proposed overhaul of the R&D Tax Incentive may hurt business investment in R&D by detracting from confidence in the stability of the system.
Please get in touch with our office if you would like to speak to someone about a potential R&D claim, or check out our website for more information.