Innovation becoming a top priority in Australia

Innovation becoming a top priority in Australia

Over the last 5 years, the tide has turned in Australia and the seeds of an innovation ecosystem have taken root.

Global Head R&D Tax Incentives

KPMG Australia

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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.

Sadly over the last couple of decades, innovation had fallen off the radar to some degree. As a result, talented Australians have sought jobs elsewhere, moving overseas to pursue innovation opportunities. 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, such as Stone and Chalk (a not-for-profit fintech start-up hub in Sydney) and accelerators backed by significant Australian and global organizations are encouraging innovation and partnerships across industry and academia.

At the same time, a change in government thinking has brought forth encouraging commitments on the innovation front.  In December, Australia’s new Prime Minister Malcolm Turnbull’s first major statement revolved around innovation and entrepreneurship. In his address, he confirmed innovation as a key economic mandate and outlined a number of initiatives aimed at supporting current and future Australian based innovation.

Five key government initiatives outlined in the innovation statement include:

  • Tax incentives for investors: There will be a 20 percent tax offset for investment in start-ups, no tax on capital gains from eligible investments and a 10 percent tax rebate for investment into new venture capital (VC) funds investing in a broader array of start-ups.
  • Changing rules around carry-forward tax losses: Until now, tax losses could not be carried forward into a new business. This rule is being relaxed to encourage investors to reinvest in other start-ups if they have tax losses in another venture.
  • Changing bankruptcy provisions: Previously, if a company bankrupts, owners were precluded from starting a new company for three years. This period will be lowered to one year as it is recognised that those that fail with one opportunity, often succeed with another.
  • Changes to visa requirements: There will be a new visa specifically for entrepreneurs to fast track people with specific skills who want to come to Australia to participate in innovation and entrepreneurship endeavours.
  • Measures and funding to improve connectivity: New funding has been announced to encourage collaboration and partnership between research institutions like universities and industry to help them innovate together.

In total, the Australian Government plans to spend around half a billion dollars to support its new innovation agenda. When combined with the innovation focus of universities and the growing interest by industry to partner with other organizations to support technology based innovation, the future is looking bright in Australia.

 

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About David Gelb

David Gelb has 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. With 25 years of experience on R&D tax incentives, David is also the Global Head of R&D for KPMG.

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