Innovators wake up – the Fire Rooster about to crow? | KPMG Australia
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Innovators wake up – the Fire Rooster about to crow?

Innovators wake up – the Fire Rooster about to crow?

Paul van Bergen discusses the new year challenges for entrepreneurs and innovators and Government support on the R&D efforts of Australian companies.


Partner, R&D

KPMG Australia


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Our Aussie summer holiday season will soon come to an end. According to Chinese astrology The Year of the Fire Rooster will start on 28 January 2017. Entrepreneurs and innovators enter 2017 with justifiable concerns about how committed the Government is to practically supporting the R&D efforts of Australian companies. Our experience shows that companies with R&D programs skewed to applied experimental development often create more knowledge based jobs and lead to greater productivity and prosperity than activities directed to first principles scientific research.

  • From a lawmaking aspect, we all await the outcome of the Government's deliberations on the extent of cuts to R&D support it wishes to implement in the near term. Read more in the Newsroom
  • On the regulatory administration front, AusIndustry's announcements and dealings with claimants indicates a desire to limit the scope of R&D activities to manage the perceived cost of the program.

AusIndustry's pre-Christmas publication on a new advance finding application makes subtle but profound assumptions about the scope of the R&D tax incentive in a way that could unnecessarily restrict the ability of companies to claim applied experimental development activities.

The advance finding application process has been in place for 5 years and is vital for Australian companies that must invest in critical overseas work to support the broader base of Australian R&D. Further, companies are more likely to find early stage investment on the back a positive advance finding.

The new guidance requires a company to 'explain why an experiment is the only way to obtain the new knowledge'. The word ‘only’ may rule out genuine R&D undertaken on a budget where there may be other ways to obtain the knowledge, beyond the resources of company. Further, moving ‘only’ from the progression of work to equate to the purpose of new knowledge, means that those at the cutting edge of applied development will need to spend more time to carefully articulate activities in their applications – in other words more red tape.

The law requires an unknown outcome that can only be resolved through systematic progression of work based on the principles of established science. However AusIndustry's new guidance appears to now require each core activity to comply with all eligibility criteria – experimental, unknown outcome, new knowledge, etc. While yet to be judicially considered, this would seem inconsistent with the legislation, which requires these criteria to be achieved across the spectrum of activities; more in keeping with the applied nature of industry-based R&D.

Just as the Rooster comes up with the sun, innovators will need to be wide awake to deal with increasingly hungry foxes outside the coop.

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