Is Australia an Innovative Country?

When thinking about innovation, many investors don’t immediately think of Australia. But Australian based innovators have been responsible for a surprising number of inventions that the world depends upon – from the black box flight recorder to WiFi and the Bionic Ear.

Over the last couple of decades however, innovation had fallen off the radar to some degree. As a result, talented Australians have moved overseas to pursue innovation opportunities elsewhere. Moreover, uninspired tax policies have hindered, rather than helped, start-ups and innovative companies.

Fortunately over the past five years, the tide has turned and the seeds of an innovation ecosystem have taken root, based around key population hubs.  Business incubators and accelerators backed by significant Australian and global organizations are encouraging innovation and partnerships across industry and academia.

At the same time, government thinking seems to be changing, and in December last year, Prime Minister Malcolm Turnbull confirmed innovation as a key economic mandate and outlined a number of initiatives aimed at supporting current and future Australian based innovation.

We spoke with David Gelb, Global Head of R&D for KPMG who provided some insights around the financial grants and incentives available to Australian companies and subsidiaries who invest in R&D.

David, tell me about your role at KPMG, and the R&D division you head up.

I lead KPMG’s R&D practice globally and am privileged in being able to assist companies (including startups, SME’s and large companies), to create opportunities to invest in innovative products and processes, which ultimately contribute in a positive way to the betterment of our society.

In fact, our R&D practice at KPMG was a ‘start-up’ and I am proud that it has continued to grow. We have created a unique multidisciplinary team of not only accountants, but also engineers, scientists, and PhD’s across multiple technical disciplines.

 

What are the benefits of investing in R&D for organisations?

Investing in R&D is critical for the growth of an enterprise, particularly in the modern world of rapid disruption. There is clear evidence that organisation who invest in R&D are more likely to grow than those who do not.

However, given that the benefits from R&D might take some time to eventuate, there is a fundamental need for governments to support companies financially throughout the R&D phase of their operations.

What incentives and grants are available for Australian businesses?

The primary Government incentive for industry is the R&D tax incentive, which provides $3b annually to companies in all industries. Any company that embarks on R&D initiatives is potentially entitled to funding and it’s a program that has delivered great benefits to the Australian economy in terms of employment, export enhancement, import replacement, as well as accelerating our global competitiveness.

What size grants are usually given at the company level?

A ‘start-up’ or SME might typically receive $100,000 – $500,000 per year. It depends on how much is spent by the company on R&D. There are over 50 countries globally that have an incentive regime similar to ours and, therefore, there is a real battle competitive across the world for the R&D dollar.

Are these grants and incentives only available to Australian owned businesses?

No. An Australian based subsidiary of an overseas company is also entitled to claim which is of real benefit to our economy. With increased globalisation, corporations have a choice on where to locate their R&D investment. With Australia’s competitive disadvantage in terms of remoteness and higher cost base, it’s incredibly important that we have incentives to attract international investment in R&D.

What are some of the challenges that organisations might experience in preparing to access available grants?

The key challenge is gaining certainty in an environment of constant Government policy changes.

Administrative barriers imposed by Government agencies may also deter companies from investing in R&D,

Companies also face challenges in understanding how to identify a reputable adviser to assist them with their applications for Incentives.

What is KPMG’s R&D Edge?

R&D Edge is a technology solution that streamlines the process by which a company can record its R&D projects and related costs. It is a ‘real time’ solution, which adds value to organisations by assisting compliance with regulations and improving efficiencies of claim collection.

It reduces the overall compliance cost from a company’s perspective.

There is some talk of changes being made to the R&D tax incentive program?

There is yet another Government review of the R&D tax incentive and it is clear that there are a variety of views in relation to how the shape of it ought to look on a ‘go forward’ basis. Most industry bodies are urging the Government not to undertake wholesale changes or cuts to the R&D incentive. Given that we have a relatively mature regime, which has been successful, any modifications should only be implemented with appropriate industry consultation.

It is acknowledged that there are competing interests of Industry policy versus the cost to Treasury, as well as Industry and Universities.

Notwithstanding this, Australia is at a point where it needs a stable R&D policy focused on strategic growth, rather than substantial change.

About David Gelb

With 25 years of experience on R&D tax incentives, David Gelb is the Global Head of R&D for KPMG. His global role has involved communications with tax and industry policy officials in many countries regarding their respective R&D tax policy matters. David has also been KPMG Australia’s representative for the KPMG Enterprise Global Innovative Startups Network, since 2014. He leads the Innovation Practice for KPMG Australia’s Tax & Legal Division and was appointed to the Board of KPMG Australia in 2015. David’s experience working with startups includes: high technology, fintech, agritech, IT and digital companies.

https://home.kpmg.com/xx/en/home/contacts/g/david-gelb.html