Tax reform is recommended as the key to support innovation, especially in biotechnology, which has the potential to be a major economic driver for Australia. It can deliver new technologies, high value exports, high- quality jobs and advanced manufacturing, if we can build on our established strengths for our future growth.

Government cannot directly fund to the level needed to optimise nation-building innovation impacts. Therefore, we need to look at tax reform, which stimulates innovation and enables Australia to retain what it has build and what it is yet to build, and specifically attract private capital investment. To gain the economic and social benefits, we recommend tax reform to support research-and-development-based innovation is critical in the following areas:
• Introduce a new tax benefit for qualifying ‘advanced’ manufacturers based on intellectual property, the Australian Innovation and Manufacturing Incentive (AIM Incentive). The incentive is based on the UK Patent Box but of course needs to be tailored by Parliament and industry to suit local needs. As CSL described to the Innovation Inquiry, building plant and manufacturing in Australia is less attractive than other jurisdictions. The patent box, or a version of it, is now active in 9 countries with the USA moving toward such a tax change this year. If for no other reason than competition, Australia needs to adopt something comparable. • Introduce a tax incentive to attract investor capital and to encourage long-term investments in start-ups. To attract private capital investments and support entrepreneurship, AusBiotech is advocating for a tax incentive to encourage investors to invest in young innovation-based growth companies and to ‘park’ their capital in pre-revenue, pre-dividend companies for lengthy periods. These so-called ‘patient investors’ are desirable as they provide more stability and certainty to start-up companies. • Preserve R&D Tax Incentive benefits in-tact, which is now seen by our sector as the number 1 policy issue requiring protection. The desire of government to reduce the benefit from 45% to 43.5% is not welcome and will disadvantage more keenly, small unlisted and listed companies who are not yet selling product. This is the category in greatest need of support. International competition is extreme and increasing, with serious investment occurring in many other key countries. Australia now needs to decide the importance of innovation in its economic future – its role in productivity and jobs - and make an appropriately-serious commitment to how best to drive the desired outcomes.

user picture Lorraine Chiroiu · 3 years ago · 457 votes · 8 comments
Tax reform is critical but it needs a macro level discussion focusing on growing the pie. This means looking at our tax competitiveness at a global scale. Progressively lower the top marginal tax rate to approximate company tax rate, increase broad based GST to 15% and provide a lower rate (e.g. 12%) for companies commercialising R&D outcomes that were developed in or owned in the Australia tax system. Global review of best practice in investment incentives for early stage companies could encourage capital flows from HNW's to this sector, driving longer term skills improvement and employment. Obviously reducing the top marginal tax rate would also indirectly reduce benefits of negative gearing and hence take pressure out of housing. There is a rare opportunity to re-evaluate the whole system.
rob read · 3 years ago
Tax reform is key in supporting new business development with foreign investment. The R&D tax incentive is a vital component for early stage and SMEs. A tax deferral scheme is recommended early stage SME, especially in advanced manufacturing. Government grants should be tax exempt for start-ups and SME's. I strongly support Lorraine's recommendations.
Mary Frey · 3 years ago
This is a really positive drive to ensure innovations and ideas stay on our shores from concept to commercialisation. By doing this it promotes companies to keep manufacturing in Australia and to continue to create employment for our communities. This is something that I am very passionate about as I believe these kinds of efforts can ensure that our children and grandchildren can live in the same great country that we grew up in. Manufacturing will create and sustain jobs for families, long after the mining boom has ended. But if we don’t start creating the systems now to encourage Australian manufacturing it will be too late. Thanks so much for pushing this incentive. Please keep Ausbiotech members posted on what else we can do to help drive this positive change!
Shay Wilkinson · 3 years ago
Good post Lorraine, and I particularly agree with the idea around the introduction of a 'patent box' style regime into Australia. In my submission, I have detailed why (in my view) the Australian Government needs to seriously evaluate the economic merits of this form of tax incentive. CSL specifically identified tax and specifically the taxation of IP related innovations as a reason for their move to Switzerland. I believe that it is important for the Australian Government to consider ways of retaining Australian developed, commercially successful ideas within Australia, otherwise the benefits associated with the Australian Government's investment in innovation will be reaped by other counties.
Tracey Murray · 3 years ago
To foster innovation we need to build and fuel the entire eco-system - from research through to commercialisation and manufacturing -- and reward those who invest for the long term.
Lis Boyce · 3 years ago
Incentivise all levels of investors from Industry Superannuation groups through SMSFs to retail investors to reward patient capital.
Matt McNamara · 3 years ago
Very important to maintain the R&D Tax Credit Scheme. This is seen as a major lifeline for small biotech companies in Australia.
Peter French · 3 years ago
What about also allocating a proportion of the $ 1 Billion p.a, from the Medical Research Future Fund for SME's to tender for developing solutions to specific healthcare challenges, along the lines of BARDA or SBIR in the US?
Mike Skalsky · 3 years ago
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