Can we fill the black hole from the fall in mining investment with new waves of technology entrepreneurialism?

Paul Van Bergen, Partner, R&D Tax Western Sydney
Paul Van Bergen, Partner, R&D Tax Western Sydney

The dialogue of business and government is rife with references to innovation, disruption and agility. It represents more than the latest trending topic in Australia. The policy settings of government and our macroeconomic environment has seen a shift to creating value adding enterprises to complement the traditional backbone of exporting our natural resources. At last week’s press conference to announce the members of the board of Innovation and Science Australia and the new tax rules for angel investors, Australia’s Prime Minister Malcolm Turnbull observed that:

“Every level of our Government is focused on a more innovative, enterprising Australia and a more innovative and enterprising Government.”

The Innovation and Science Australia Board of five men and two women includes technology entrepreneurs and CEOs. The inclusion of successful entrepreneurs and venture capital players sends a clear message of the importance of fostering commercially focused R&D and the creation of new businesses to commercialise new products and services through innovative business models.

A new tax incentive aims to encourage angel investment and innovative drafting of the legislation includes a 100 point test to qualify as an innovation company. This allows flexibility in the pathways that start-ups can adopt to attract angel investment. The 100 point test provides alternatives to the intensity of R&D. Rather, it focuses on new product/process/markets with global potential and active participation in accelerators and incubators. The consistency in definitions across the multiple facets of R&D tax incentives and angel investor incentives helps start-ups and their investors. Importantly it should reduce red tape and prevent anomalies precluding otherwise worthy companies from participating.

The new section 360 will follow section 355 of the Income Tax Assessment Act 1997 and borrows many of the features of the R&D tax incentive. The angel investment scheme aims to lift collaboration by rewarding companies that participate in accelerators, incubators and the like.

Venture capital firms and angel investors already focus on companies who successfully complete accelerator programs to screen for potential start-ups to invest their risk capital.  Many involve collaboration between industry, academia and research institutions (both public and private). Taken together with improvements to Early Stage Venture Capital Limited Partnerships, the tax and innovation policy settings create a more attractive environment to have clusters of innovation and technology investment for start-ups throughout Australia where the investors and start-ups choose the winners.

A question to ponder

How can public and private research institutes and universities share their research abilities so entrepreneurs can create technologies we have not even though about? These will create the industries of the future.

Some of the more cynical asked in the debate about the quest for gravitational waves, “what’s in it for the economy?”  Like many good questions, we have yet to find out. But think of the possibilities for devices that are so sensitive that they can pick up a wave the thickness of an atom and the computational power to interpret that information. It was those sensors that detected gravitation waves.

Maybe the next great innovation will help better understand something as complex as the human brain or how viruses and cancers mutate? This could lead to cures not yet thought of. And there is certainly an economic benefit (and an even greater benefit to society) to be found there.

One thought on “Can we fill the black hole from the fall in mining investment with new waves of technology entrepreneurialism?

  1. For the umpteenth time, everyone forgets about the 2nd largest sector, one-third of the economy – agribusiness (not just agriculture). It always has, is and will be the bedrock of national productivity. Being largely SME in nature, it pays all of its profits within Australia, and thus pays all its taxes in Australia. Now that’s being a real Australian.

    As for the notion of “How can… research institutes…. share their research abilities so entrepreneurs can create technologies…” Implicit in the phrase is the notion that entrepreneurs create AND IMPLEMENT the innovation, so a great amount of commercial exploitation does not actually occur within research institutes. If the genuine entrepreneurs create innovation – then they go shopping, increasingly offshore. The locals increasingly cost too much. The inflexibilities and high-cost structures of cloistered Australian research institutes are thus reactive, and behind the eight-ball, when trying to secure research funding – not from genuine private funding, but increasingly from high-cost public sources.

    Summary: most everyone is blind to the real powerhouse of the economy, and when they do see it, they extract research dollars using compulsory levies and then spend that money via bureaucracies with little-proven effect (in high-cost structure institutions)…. at the rate of $400m+/yr.

    If you read this, and it gives you a furrowed brow, then you are still blind to those who have always sustained you. Continued over-emphases on the big end of town and chasing govt and foreign-owned billing sources only worsens your ‘un-Australianness’.

    Agribusiness: we really do grow you.

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