Australian Government continues to lack vision for manufacturing

Australia now ranks 116th out of 142 countries when it comes to converting research dollars into innovation and commercial success. The OECD estimates that the 'clever country' spent only 0.227% of GDP on R&D in manufacturing in 2011, compared with 1.29% for the US and 1.33% for Germany.

In a submission to the federal government's tax review, the Australian Advanced Manufacturing Council (AAMC) said the federal government's recent decision to place a $100 million cap on R&D expenditures that companies can claim as tax deductions is a "significant backward step" and calls for the immediate removal of the cap.

In addition, the Tax and Superannuation Amendment (2015 Measure No.3) Bill, proposes to reduce the refundable tax offset from 45% to 43.5% and the non-refundable tax offset from 40% to 38.5%, which the AAMC calls "destructive" to innovative companies.

In a submission to a Senate inquiry last year, biotech company CSL Group wrote: "Australia is a relatively unattractive location for entrepreneurial manufacturing or as a base from which to commercialise locally developed intellectual property into global markets." CSL recently invested around $500 million in a new plant to manufacture and supply three new products in Switzerland, due to what it saw as a lack of financial incentives and an uncompetitive tax system in Australia - yet another case of the results of Australian research going overseas.

The AAMC is calling for an innovation incentive scheme in the form of a rebate to make Australia more competitive. It proposes a 10% tax on qualifying income, saying companies would need to write detailed submissions of any plans to expand advanced manufacturing in Australia, and also calls for a doubling of R&D incentives for any R&D done in collaboration with an approved Australian research institute or university.

It is also advocating accelerated depreciation rules to encourage manufacturers to invest in newer plant and equipment and adopt more efficient processes, and to recognise intellectual property (IP) as a depreciable asset - adopting international accounting practice and allowing IP amortisation expenses for tax purposes.

As it has done for generations, the Australian Government, through its ongoing lack of vision, continues to allow the creativity and intellectual endeavours of Australians to leave the country and become overseas property. No news here - just 'the same old same old'.

Source: Sydney Morning Herald