National funding framework needed for cohesive R&D

Tax issues

Georgia King-Siem, KPMG National Lead Partner – Innovation Policy, said: “It should be acknowledged that there is considerable investment going into R&D – it has grown over the past 5 years at a higher rate than other asset classes, and totalled $26.5bn last year alone – but there is significant variation across industries and types of investment. We are below the OECD average with comparable countries, so there is much to do, to achieve a cohesive R&D ecosystem.

“On tax, for example, the main program is the R&D Tax Incentive, but the financial benefit can only be claimed after the income year in which the money is spent. As well as a time lag, companies must typically self-assess eligibility, which can be disallowed, sometimes years later, and can then face penalties and interest charges. This lack of certainty is an inhibitor to accessing the tax incentive and an impediment to investment.

“Given the often-high-risk nature of innovation, every effort should be made to provide clarity around the eligibility of tax offsets. Existing tax incentives could be streamlined to reduce administrative burdens and increase accessibility. They should also be geared to better support experimental development undertaken in a commercial setting, not just basic and applied research.”

Collaboration

Some of the key issues in boosting R&D in Australia involve collaboration. The paper observes that businesses often find collaboration with universities challenging, while smaller businesses can struggle with government procurement processes. There is also limited access to infrastructure and facilities – for the most part, businesses must invest in their own equipment and infrastructure, with few incentives to collaborate with others.

To address this, KPMG’s paper focuses on the critical role of universities and research institutes in supporting world-class research translation in Australia, and how to generate a thriving innovation culture, based on strong collaboration between industry, government and researchers, targeted to support the nation’s economic and social outcomes/priorities.

One key component is to replicate international examples of successful innovation hubs and ecosystems – referred to in the government’s discussion paper – in which researchers, entrepreneurs and investors can be brought together. The hubs would provide access to modern facilities, funding opportunities, and mentorship programs to promote collaboration and enable access to infrastructure to reduce the costs of R&D for companies.

Theses hubs would also help bring best practices to the sector. KPMG paper outlines the critical steps to achieving this – conducting a current state and gap analysis; designing an overarching strategy and desired future state; and developing successful research partnerships.

In addition to the collaboration challenge, the submission observes that Australia also faces a range of inhibitors to R&D.

• High business costs – Australian businesses operate in a highly-regulated environment, with high compliance and labour costs by international standards. Given this high cost base, Australian companies may have a lower bar for additional expenditure on areas with innate risks such as innovation and R&D
• Uncertain government support programs – many government grant programs are created and then terminated, which does not encourage time-consuming applications for those grant
• Lack of skilled workforce – a shortage of STEM-skilled professionals can limit capacity for R&D and innovation. The HECS reduction on some relevant courses has not created the necessary increase in STEM graduates.

Georgia King-Siem said: “While there are many issues to address, encouragingly, there is a real focus on, and recognition of, the critical role innovation plays in economic prosperity – the Productivity Commission has been tasked with a series of inquiries into ways to boost Australia’s productivity. But as a country we need to better transform ideas into innovations and outcomes.

“Above all, support programs should be aligned to, and assessed against, a national framework which is well-communicated and mapped out. Currently policies and programs often lack cohesion, resulting in a fragmented and sometimes contradictory R&D ecosystem. We hope this current review will result in industry, government and researchers agreeing on realistic recommendations which are then properly implemented. Increased collaboration is crucial but it needs to be targeted to achieving economic outcomes.”

Learn more in Strategic review of Australia's R&D system: KPMG Submission.

For further information

Ian Welch
KPMG Communications
0400 818 891
iwelch@kpmg.com.au