Australia is a legitimate and impressive global contributor to fundamental discovery research, producing 3% of the world’s research publications with only 0.3% of the population. Additionally, the 2013 INSEAD Global Innovation Index ranks Australia 11th in terms of innovation input and 32nd in innovation output. However, when these figures are converted to innovation efficiency ratio, Australia dives to 116 out of 140 countries assessed.
To increase Australia’s global competiveness in innovation and manufacturing, a collaboration of Australian industry bodies and companies is urging the Federal Government to implement a ‘patent box’ style tax incentive, known as the Australian Innovation and Manufacturing (AIM) Incentive, that offers a reduced tax rate on qualifying profit from intellectual property (IP).
The AIM Incentive is designed to address the gap that leaves our IP vulnerable, and support Australian innovators and manufacturers, while retaining our home grown IP and attracting IP created overseas to be commercialised and managed from Australia. The implementation of the AIM Incentive should make the commercialisation of IP and manufacturing in Australia more genuinely viable for businesses, especially, if coupled with other measures, such as cutting red tape and increasing flexibility in industrial relations.
The AIM Incentive would see the Federal Government provide tax relief based on the retention of IP ownership and associated commercialisation of IP in and from Australia. It would also support companies that make goods outside Australia where significant ‘value add’ activities are performed in Australia and the net benefit from its sales will benefit the Australian economy.
The introduction of the AIM Incentive would provide the optimal policy framework in which to turn Australian ideas into locally manufactured products. Furthermore, it would not only safeguard manufacturing jobs, help retain our IP and facilitate innovation; it would also contribute to Australia maintaining a robust, broad-based economy.
It is imperative that Australia takes action to remain competitive and relevant on the world stage, especially, when economies such as the UK, France, Switzerland and China are already reaping the benefits of their patent box regimes. If we are to maximise Australian innovation and reinvigorate the manufacturing sector in Australia, it is vital that the existing R&D Tax Incentive be complemented with an end-to-end tax regime that can secure Australia’s competitiveness for the future.
Click here to read more about the AIM Incentive and innovation in Australia.
