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In the media: Universities call for increased incentives to boost small business research

The Australian, 4 June 2015

By Kylar Loussikian

Australian universities have urged the federal government to increase incentives for small businesses to collaborate with public research institutions, warning that the “bread and butter” of the economy is missing out on crucial assistance.

The recommendations, contained in submissions to the government’s tax white paper made by Universities Australia and the Group of Eight, which represents Australia’s most prominent research-intensive universities, also include higher tax concessions and preferential treatment for companies that pursue research in conjunction with academics.

The proposed boost to small business research comes after a day of political theatre that saw Labor’s proposal to pass the government’s small business budget measures rejected by government MPs. The submissions are part of a three-stage process that will see a green paper in the second half of this year and a white paper in early 2016 as part of the government’s efforts to overhaul the tax system.

But the government has already indicated it will not consider changes to major tax issues, including GST, negative gearing and superannuation, in the short term.

The current R&D tax incentives scheme is expected to cost $2.4 billion this financial year. Despite the support, business expenditure on research development as a percentage of GDP remains below the OECD average of 1.6 per cent, and Australia remains second last of 30 OECD countries for the proportion of large businesses collaborating with higher education and public research institutions on innovation.

The Go8 has recommended the $20,000 eligibility threshold for the R&D tax incentive be removed for smaller businesses, but suggested it remain for companies over a certain size.

Smaller incentives could also be used to push smaller businesses to commercialise existing university research to combat the “valley of death” phenomenon between research and commercial application.

Vicki Thomson, chief executive of the Go8, said the present arrangements only incentivised big business. “Our bread and butter is Australia’s small and medium businesses, and the federal government needs to build in far more R&D incentives for that sector,” she said. “If you look at current government policy, which is about promoting small businesses, we should be looking at tax incentives for them to build research into their business profile.” The Go8 has recommended higher tax concessions for larger businesses that partner with universities for projects aligned with government-outlined priority research areas.

Other options might include consideration of variable corporate tax rates, the Go8 submission reads, pointing to China, where companies granted a specific status qualify for a 10 per cent reduction in tax rate.

NYSE-listed biotechnology and electronics firm Agilent Technologies is one of several multinationals with existing collaborative research agreements with Australian universities.

Philip Binns, the managing director of Agilent in Australia, said the recommendations were reasonable, but it would be important to separate incentives into long and short-term ones.

“Short-term incentives will generate engagement, which will get (small businesses) when they would otherwise not do the research at all,” he said. “Our perspective is about additional research, so longer-term tax incentives do more to encourage us to work with local universities rather than international ones.” Mr Binns said Agilent had agreements with a number of Australian universities as part of an effort to extend its current products into new markets.

Similar recommendations to those proposed by the Go8 are included as part of a detailed submission on behalf of Universities Australia, representing all 39 Continued on Page 20 Call for increased incentives Continued from Page 19 domestic universities, which warns the current approach “can create significant cashflow difficulties for an early stage start-up”.

But Universities Australia says any redesign of the tax incentive scheme should ensure they are not used to reduce the cost of activities businesses would otherwise have conducted as part of their normal operations.

Anne-Marie Lansdown, the deputy chief executive of Universities Australia, said money used as part of the R&D incentive scheme could better be targeted to push university collaboration.

Research-intensive technology universities, through the Australian Technology Network, recommended allowing the R&D tax incentive concessionary franking treatment.

“Under the current program, companies are unable to provide a franked return to the R&D benefit to shareholders, the ATN submission reads. “As a result, the market discourages companies from investing in R&D in favour of less risky investments with more tax effective returns.”

Source: The Australian

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