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Monday, 9 December 2013
Page: 2010


Mr ZAPPIA (Makin) (19:47): The Tax Laws Amendment (Research and Development) Bill 2013 effectively limits the research and development tax incentive to companies who have an aggregated assessable income of less than $20 billion. I understand that that will affect some 15 to 20 firms around the country. It is estimated to save the Australian government somewhere around $1.1 billion over the next four years. I also understand that this is legislation that is similar to legislation that was proposed by the previous Labor government—with some major differences. The differences are why we have taken the position not to support this legislation. The proposition from the previous government was tied to a whole host of job-creating initiatives that would have been directly funded as a result of the savings made. Ultimately, it is about creating a stronger economy and jobs in this country. This legislation does not do that. It simply makes the cuts, and I assume the funds go into general revenue. I will talk about that a little bit later.

To highlight how much government members support this legislation, I noticed that there was only one speaker in support of it from the coalition benches. I heard the speech from the member for Bradfield, because he was the only one who dared to come into the chamber to support this legislation. I think I could have been excused for believing that he was arguing a case against this legislation by supporting the importance of research and development to the nation. If you support it as strongly as he did—I thought he did a good job in arguing the case for the importance of research and development—then why would you cut the tax breaks that go to someone or some company that invests money in research and development? If time permits I might come back to some of the points that were made in that contribution, because I thought that he made a very good case for the importance of research and development to our nation.

I just want to go back to what Labor tied its proposition to, because there were some very important elements of our proposition that have been thrown out the window with the government's proposal. The previous Labor government set up a new Australian Industry Participation Authority, which was intended to help businesses to build their capabilities and connections to win work on major projects. The authority was set up under legislation, and it had a purpose. The purpose was to assist Australian business.

There were other aspects of the proposal. By legislating the Australian industry participation arrangements, major projects worth $500 million or more were required to implement Australian industry participation plans that gave local industries opportunities to win work on a commercial basis. That is absolutely critical, because quite often we see local businesses missing out when major contracts are put into place. Others come in from outside, but the locals do not always share in the money that is invested in those projects.

Under the previous government's proposal there was also a requirement for projects that were worth $2 billion or more, and that applied for concessions under the Enhanced Project By-law Scheme, to embed Australian Industry Opportunity officers within their global supply offices. Again, that was a mechanism to help businesses with the projects that they were trying to engage in.

Reforms to the anti-dumping system, with the appointment of an Anti-Dumping Commissioner, were quite deliberately targeted at protecting Australian industries and businesses from unfair overseas competition. In fact, we debated some changes to that proposition in this place only last week.

With the savings that would have been made, we were prepared to invest in some $500 million around the country to establish 10 industry-innovation precincts. These, in turn, would have driven business innovation and growth in areas that would have given Australian businesses a competitive advantage.

One of those proposals was for the region I represent in South Australia, on the northern side of Adelaide. I suspect there was a proposal and submission made to establish a manufacturing hub in the region. I am aware of a similar hub, the Defence Teaming Centre, in the northern region. I am also aware of the benefits that those kinds of hubs bring to the region. You get businesses working together and supporting one another. I can well recall a local business that was into manufacturing and needed a way of doing something smarter and better. The owner turned to someone in the precinct who ran a different sort of business and asked for their support and advice. Together they came up with the solution they needed. That is the kind of support that leads to innovation, and it happens when you have a precinct of businesses supporting each other.

The issue of industry innovation was also part of creating an industry-innovation network to allow businesses around Australia, including regional areas, to take part in precinct activities—to gain access to knowledge, to support one another and to create partnerships that, in turn, would enable them to prosper. There was a host of additional matters that the funding would have been used for, and I will quickly skim through some of those. There was intended to be a new, $350 million round of the Innovation and Investment Fund to stimulate private investment in innovative Australian start-up companies. We made changes to the venture capital tax arrangements to improve clarity and certainty for investors and to encourage participation by 'angel' syndicates. There were growth opportunities and a leadership development initiative to provide focused support for small- and medium-sized enterprises with a high growth potential. Furthermore, there was the extension of the successful Enterprise Connect program for SMEs to more manufacturing firms and new sectors—such as professional services, information and communication technologies and transport and logistics—thus improving the productivity of those businesses and enabling those sectors to grow.

These are just some of the things that the previous proposition included and which are now not part of this proposal, so all of those benefits are likely to be lost. I notice that, while the coalition supported the antidumping measures and changes to the R&D incentive targeting, they did not support all of the measures included in the plan for Australian jobs. That is particularly concerning. If you say to a business, 'We're going to take something from you,' at least you would be expected to say, 'But in return we will give you something back'. The opposition also did not support the Australian Jobs bill 2013, which legislated the Australian industry participation arrangements.

I return to the issue of innovation. The member for Bradfield made a terrific case for why you should not support this legislation. He was absolutely right when he said that innovation is the key to our international competitiveness, to our productivity gains and to efficiencies in business operations right across the country. It really does not matter who funds or drives the innovation because, ultimately, the benefits will flow through to the rest of the economy. So, whether it is a small company or a big company, if it invests in innovation, why should it be treated any differently from any other company in terms of its tax treatment? It should not. The benefits flow right through to the rest of society. Only last week in this place we debated the issue of research and development spending for primary industries and how important it was to the primary industry sector of this country. It is not only important but also was noted in the last decade that research and development across primary industries has been falling. We need to encourage research and development expenditure, not discourage it by taking away the tax incentives that come with it.

Under the previous government there was a proposal to provide quarterly tax incentives for funds that had been spent on research and development. I do not see that the quarterly tax incentive proposition is included in this legislation. If you want to encourage investment in research and development, you provide those kinds of incentives. If a company is spending money on research and development, just like it pays its quarterly tax through its BAS statements, I am sure it would like to do the opposite and get the credits for money it has spent. I believe that is an appropriate thing to do, and it is something this bill has left out.

This bill is simply about saving money for the government. The reason they need to save money is that they are finding they cannot balance their budget. If they do not balance their budget—and they promised before the election that they would get the budget back in the black—they have failed in their commitment to the Australian people. You can only blame the previous government for your failings for so long; the Australian people will not continue to believe the rhetoric that it is all the previous government's fault when the current government have been in office for a substantial period of time. This government have now been in office for three months, and, as each week ticks by, they become more and more responsible for the outcome of their budget and for the delivery of the budget surplus that they promised. They cannot continue to blame previous governments when they have, in fact, taken over management of the system and the economy and are in direct control of what funds they have. They are simply trying to balance their budget on the back of a proposition that affects industries and will diminish the number of dollars that are spent on research and development in this country. That can only be bad for the future of our nation.

Debate interrupted.