From the cochlear implant and the first ultrasound scanner to wi-fi and penicillin, Australia has indeed developed highly innovative products in the high-tech and medical sectors. However, while these industries are traditionally associated with the mere mention of ‘innovation’, they do not encompass our whole economy.
In Australia particularly, high-tech manufacturing contributes to less than 1 per cent of Australia’s total output. Hence, Turnbull’s mission to improve Australia’s reputation as an innovative country will entail a broader emphasis on innovation by business executives in all industries.
However, as noted above, the word ‘innovation’ is often associated with research into products such as penicillin, smart phones, or passport-less travel – not paddocks, livestock or soil. Despite this, Australia’s agriculture sector, for example, has a rich history when it comes to research and development (R&D). In fact, in the agriculture sector R&D has helped Australian agriculture double its productivity over the past 25 years.
Moreover, Agricultural research and development corporations were several of the first in Australia and commenced in the early 1900s with the wool industry. By the 1930s, in acknowledgment of the prominence of the agricultural sector generally, the idea spread to other commodities and the government started to provide matching funding. Overall, this is just one example of how research and development in rural sectors has assisted in keeping these sectors innovative and competitive over the ages.
Hence despite being in, as Turnbull describes it, a time of ‘digital disruption’, it is still important to realise that even the less traditionally ‘high-tech’ industries have a part to play in Australia’s shift to being more innovative. However, it is imperative to note, innovation is a much broader notion than new products; the OECD outlines it as comprising of new or significantly improved services, marketing or organisational methods. These kinds of innovations due to R&D are indispensable for amplified productivity and competitiveness in numerous industries.
In light of this, there is a considerable body of evidence which shows the importance of R&D and innovation for the wealth of both companies and countries. Certainly, R&D plays a critical role in the innovation process – it’s fundamentally an investment in technology and future capabilities which is transformed into new products, processes, and services. Moreover, the government actually provides generous tax savings for eligible R&D activities under the R&D Tax Incentive. Swanson Reed provides specialist expertise transversely to a broad range of industries and has assisted many clients attain tax cash savings under the R&D regime. Contact one of our specialist R&D Tax consultants to find out more about the scheme.