Tax breaks for investors in early stage innovative companies and a new Biomedical Translation Fund to support commercialisation were among the long-advocated-for highlights delivered today as AusBiotech welcomed the Turnbull Government’s launch of its National Innovation and Sciences Agenda (NISA).
The NISA, which is titled ‘Welcome to the ideas boom’, aims to “drive Australia’s economy and will drive prosperity and competitiveness” and was announced in Canberra earlier today by the Prime Minister, Malcolm Turnbull and the Minister for Industry, Innovation and Science Minister, Christopher Pyne to “support innovative businesses, grow private sector investment in research commercialisation and increase the flow of venture capital to high potential startups.” The Prime Minister has raised the prominence of innovation within the Government, by establishing the new Innovation and Science Committee of Cabinet, which he will Chair.
CEO of AusBiotech, Dr Anna Lavelle, said: “It is indisputable that innovation is firmly on the agenda, where it ought to be, as a key driver of productivity for our country. We are keen to see this positive policy transformed into action that makes a difference to Australia’s ability to commercialise and benefit from our world-class research and development (R&D).” “The message is ‘loud and clear’ that Australia needs innovation to be the big winner for our quality of life and economy. AusBiotech is pleased to see the Government has been listening to its calls for capital gains tax breaks for investors in early stage companies, the ‘same business test’, the Biomedical Translational Fund and improvements to Employee Share Schemes.”
“The introduction of the patent-box style incentive remains an important, but so far overlooked opportunity, to keep home-grown intellectual property in Australia once it nears and reaches commercialisation and AusBiotech will continue to advocate for the Australian Innovation and Manufacturing (AIM) Incentive. We look forward to furthering discussions with the Minister,” said Dr Lavelle.
The NISA says a new independent board, Innovation and Science Australia (ISA), will replace the current function of Innovation Australia and will be responsible for strategic coordination and advising government on all science, research and innovation matters. ISA will be chaired by Mr Bill Ferris AC, with Australia’s next Chief Scientist, Dr Alan Finkel AO, as deputy chair and “ISA will empower government to think differently, ambitiously and on a global scale; growing a stronger, more entrepreneurial innovation system. It will complement the Commonwealth Science Council, which will continue to advise the government on high level science challenges facing Australia.”
One of the ISA’s first responsibilities will be to review the R&D Tax Incentive, to “sharpen its focus on encouraging” additional R&D spend. AusBiotech will seek to participate in the review, as the industry organisation has with the previous reviews if the R&D Tax Incentive. Unfortunately there is no mention of abandoning the 1.5% cut to the R&D Tax Incentive, which remains on the notice paper.
The measures announced today included:
• A $250 million Biomedical Translation Fund to develop and commercialise promising outcomes from Australia’s research. The Fund will be an independent body to invest in promising biomedical discoveries and assist in their commercialisation, funded from the Medical Research Future Fund ($125 million per year for two years).
• Access to capital at the crucial early startup stage will be boosted through tax breaks that encourage private sector investment, including:
• New tax breaks for early stage investors in innovative startups. Investors will receive a 20% non-refundable tax offset based on the amount of their investment, as well as a capital gains tax exemption. Claims are capped at $200,000 per investor per year (which would apply is $1 million is invested). The incentive will be available for investments in unlisted companies, less than 3 years old, that have expenditure and income of less than $1 million and $200,000 in the previous income year respectively.
• Introducing a 10% non-refundable tax offset for capital invested in new Early Stage Venture Capital Limited Partnerships (ESVCLPs), and increasing the cap on committed capital from $100 million to $200 million for new ESVCLPs; • Relaxing the ‘same business test’ that denies tax losses if a company changes its business activities, and introduce a more flexible ‘predominantly similar business test’. This will allow a startup to bring in an equity partner and secure new business opportunities without worrying about tax penalties; and
• Removal of rules that limit depreciation deductions for some intangible assets (like patents) to a statutory life and instead allow them to be depreciated over their economic life as occurs for other assets.
• Improvements to Employee Share Schemes (ESS) to limit the requirement for disclosure documents given to employees to be made available to the public. This will allow otherwise non-disclosing companies to offer shares to their employees without having to reveal commercially sensitive information to competitors. This will make ESS more user-friendly for innovative companies, allowing them to attract motivated staff without a substantial initial outlay. • A new Global Innovation Strategy for Australia will invest $36 million over five years to:
• Establish five ‘landing pads’ in global innovation hotspots Silicon Valley, Tel Aviv and three other locations to support entrepreneurial Australians. Supported by an Austrade coordinator, landing pads are an operational physical space in which Australian market-ready startups can access entrepreneurial talent, mentors, investors and a wider connected network of innovation hubs.
• Provide $22 million seed funding to assist Australian businesses and researchers to collaborate with international businesses-researcher clusters.
• Reduce barriers to regional collaboration and promote an open-market approach to industry-research collaboration, including Asia-Pacific workshops, multilateral projects and mobility support.
• Funding locked in for research infrastructure under the National Collaborative Research Infrastructure Strategy (NCRIS), including the Synchrotron, for the next 10 years.
• Improvements to rules for crowd-sourced equity funding (CSEF) that allow entrepreneurs to raise funds—up to $5 million per year—from a large number of individuals in return for equity in their company. The rules will give companies a five-year exemption from the normal reporting and disclosure requirements that apply to public companies.
• Boost industry-research collaboration with: The Australian Research Council Linkage projects scheme open for continuous and fast-tracked applications; introducing new research block-grant funding arrangements for universities that will give equal emphasis to success in industry and other end-user engagements, and to research quality, with an additional $127 million to university research block grants over the forward estimates; and a new component of the Entrepreneurs’ Program, the Innovation Connections program, which will connect more small and medium businesses with researchers, with $18 million to expand and refocus the existing Research Connections programme to drive new industry-led collaborations.
• A CSIRO Innovation Fund with two parts: a $200 million early stage innovation fund to support co-investment in startups companies, products and services created by medical research institutes; and a $20 million expansion of the CSIRO’s accelerator program.
• An $8 million investment in a network of incubators to help start-ups get the resources, knowledge and networks they need.
AusBiotech has also welcomed the bipartisan support for innovation as also seen in the Opposition’s launch of a new wave of its innovation policy on Friday and says if elected, Labor will establish a new independent agency called Innovate Australia charged with accelerating economic growth, delivering critical innovation programs and providing expert advice to governments modelled on the highly-successful innovation agency in the UK, Innovate UK.
The Shorten Labor Government says it will build on its previous announcements, including measures to increase access to venture capital to commercialise great Australian ideas and support local start-ups, including backing in great ideas through co-investing in early stage and high potential companies through the $500 million Smart Investment Fund. Dr Lavelle said: “AusBiotech has welcomed the convergence of views and bipartisan support for innovation in the recent raft of announcements.”
Both of the major parties are committed to many policies in common, including:
• Innovation as key driver of our economy;
• Tax incentives to encourage investment in early stage and start-up companies;
• Increased support to foster collaboration between industry and researchers;
• Support for the STEM (science, technology, engineering and maths skills);
• Support for incubators and accelerators; and
• Safe ‘landing pads’ as part of global engagement for companies.
Among the new measures, Labor proposes to “help supercharge the formation of startups in Australia” by delivering tax relief for angel investors through a new Australian Angel Investment Scheme and through changes to the existing Early Stage Venture Capital Limited Partnerships.
The plan also includes “backing our best overseas” and boosting commercialisation of Australia’s R&D and support Australian entrepreneurs in the United States by setting up a dedicated innovation and commercialisation ‘landing pad’ in San Francisco – as well as a plan to accelerate innovation in our regions with rural and regional incubators.
