The Turnbull government have voiced their opinion on changing Australia to be more innovative, namely by endorsing start-ups. Early this month, Wyatt Roy, the Assistant Minister for Innovation, cited about how Israel transformed itself into a modern economy with more start-ups per capita than any other country, and how Australia could do the same to position ourselves as a world leader. The Turnbull government has already revealed that they are working on a major innovation agenda with crowdfunding for start-ups and tax breaks for ‘angel investors’ taking top priorities.
However, start-ups are not the only answer in ensuring Australia drives an economy of innovation. Businesses already operating in Australia can propel innovation in their company by investing in research and development. Certainly, Australia has quite small capital in comparison to other countries, but we are a strong, capable player in the global research system and that is a great asset.
The most suitable, recent example of harnessing innovation in established businesses is, rather surprisingly, mining. In the past 20 years, Mining Equipment, Technology and Services (METS) sector has greatly evolved in Australia. For example, in 2013 there was over 1,000 METS firms with a turnover in the A$70-90 billion range and employing more than 300,000 people. Furthermore, in the 2012 financial year, the mining sector invested at least A$1.5 billion in R&D.
More recently, Rio Tinto has been driving innovation through implementing driverless mining trucks. The trucks are currently moving high-grade iron ore that is mined at Pilbara, Western Australia. The trucks are controlled by an operations centre in Perth and can run 24/7, vastly reducing the possibility of dangerous mistakes and fatigue in a normally high-risk job.
Although start-ups are a great idea to boost innovation in Australia, established organisations that invest in R&D can expedite innovation and create returns for their own business. Additionally, R&D can assist in creating long-term economic value and a competitive advantage for Australia. Undoubtedly, creating new opportunities for innovation is crucial and incentives are a big enabler of this. The R&D Tax Incentive is one of the most effective methods of support for research. Over the last ten years the US venture capital market invested four times more than Australia (per capita). R&D Tax Incentives can play a substitute role where venture capital cannot be raised and by investing in established organisations, individual companies can assist in driving innovation nationally by increasing competitive advantage. For more information, or to find out if you may be eligible for this grant and how it will affect your claims under the R&D tax incentive, contact one of our specialist advisers.