“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. ”