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Monday, 22 November 2010
Page: 3200


Mr SLIPPER (4:14 PM) —At the outset I would like to express my indebtedness to you, Mr Deputy Speaker Sidebottom, for taking the chair so that I am able to make a contribution to this cognate debate on the Tax Laws Amendment (Research and Development) Bill 2010 and the Income Tax Rates Amendment (Research and Development) Bill 2010. Australia will never be able to compete with low labour cost countries in so many areas of industry and endeavour. Therefore, if we are going to be successful in the world, we have to encourage innovation and channel that innovation into productive industrial enterprise. That is why for quite some time in Australia we have had support for research and development. If we are able to support innovative industries and if we are able to bring those innovative ideas into reality in Australia, it will mean we are at the cutting edge of innovative technology and, if developed, that technology can create industries, exports, jobs and opportunities.

We are a very innovative nation. We are one of the most innovative nations anywhere in the world. But what industry needs is support to encourage that innovation and, equally importantly, to develop that innovation in this country so that we do have productivity from innovative ideas in Australia. That is why there has broadly been a sense of bipartisan support for the concept of research and development. But in relation to the particular details of that support, from time to time different sides of the House, including the crossbench, may have differing points of view.

I support the amendment moved by the honourable member for Indi. While I think there is bipartisan support for the principle of research and development, my view is that the legislation currently before the chamber does not achieve an outcome that is good for Australia. The government has failed to adequately recognise the value of research and development support for business in Australia. This is indicated by the bills before the chamber.

At the 2007 election, the now government accused the former Howard Liberal-National government of having largely ignored the contribution of research and development to economic growth and competitiveness. As part of the review of the national innovation system that it initiated shortly after being elected, the new Rudd government sought to evaluate the effectiveness of four existing tax incentives for business R&D—the 125 per cent R&D tax concession, the 175 per cent incremental premium concession, the 175 per cent international premium concession and the R&D tax offset.

Following the review, the government announced in the budget for 2009-10 that these four forms of support would be replaced with a new R&D tax credit. That is the policy of the government. The new package will give expression to substantial restrictions to the range of activities that qualify for support, including by introducing new definitions of ‘core R&D’ and ‘supporting R&D’, changes to the eligibility criteria so that supporting R&D will only be funded if it is undertaken for what it calls the ‘dominant purpose’ of supporting core R&D, the introduction of a confusing and subjective dominant purpose test, significant increases to thresholds for assistance under new feedstock provisions, and reductions in support for spillover and additionality benefits. The government’s publicly stated intent has been to offer enhanced incentives for companies to invest in R&D, especially small and medium enterprises. The government claims that the new R&D tax credit will be revenue neutral and will offer more predictable, less complex and more generous support.

The opposition, though, has the view that what the government seeks to achieve will not in fact be achieved by the legislation before the House. We are of the view that it will have the reverse effect and that what is proposed is principally a matter of revenue raising and that what it could do is deny to many businesses the incentive which is currently there and which is necessary to assist the development of ideas. We as a country need to give encouragement to companies to be innovative and then to develop that innovation for the benefit of the Australian economy as well as for the economic benefit of those companies. If our companies are successful then they will create jobs and exports, they will boost our economy and there will be a win-win situation all around.

The money the government provides is often really only seed funding. It provides some support to encourage the development of technology, and that is certainly an important step, but unfortunately the legislation currently before the House is counterproductive and does not seek to achieve what the government purports that it will achieve. In line with the amendment moved by the member for Indi today, I ask that the government release its full financial modelling on the impact of this bill. It is vital that we all know by what figure the dollar support will fall for those Australian businesses that are active in their research and development, progressive in their operations and determined to create new products and services that will have a long and lasting impact on their own success and, as a result, be economically beneficial to the wider community.

The government sometimes seems to forget that research and development support at a reasonably high level is important, and it will become more and more vital as years go on as we seek to further diversify and widen our economic support base and as we try as a country to not be as dependent on traditional sectors such as mining and resources. However, even those areas of our economy have also been involved in research and development. What we want is to diversify—obviously encourage the mining and resources industries, but make sure that we do not become dependent on any particular sector in our community. It obviously makes a lot of sense to encourage entrepreneurs and industry to conduct research and development that is sensible and has genuine commercial possibilities, and for which the economic benefit to this country is clearly obvious—from job creation and employment through to the development of new technology and expertise.

I am privileged to represent, arguably, what is the most wonderful part of our country, the most attractive part of the state of Queensland and also of the Commonwealth of Australia, and that is the area of the Sunshine Coast in Queensland. We have many innovative companies in our area. A lot of people say that the Sunshine Coast is an area where people go to retire, and that is true. They like to move from what I sometimes refer to as the ‘rust belt’ areas of southern Australia to come to the Sunshine Coast and the wonderful climate and quality of life that we have. However, increasingly, the Sunshine Coast is also the residence of choice for many young Australian families. One of the problems that we have on the Sunshine Coast is a lack of industry and a lack of employment, particularly industry that is clean and green. We have a lot of innovative companies; regrettably, time will not permit me to list them all but I would like to focus on one particular company called Snapsil. This has been a magnificent success story and Snapsil says that a significant boost to its success today came as a result of a development grant received, at an opportune time, from the former Liberal-National government several years ago.

Brad Teys, the Chief Executive Officer at Snapsil, told my office that there is a gap in Australia between when a company or individual comes up with an idea for a new product or service and the moment when that product becomes commercially viable, and that gap needs to be bridged to enable more new companies to realise their full potential. The government needs to recognise, as the previous Liberal-National government did, that it has an important and key role to play in stepping in to fill that gap. I think that is an appreciation that the government needs to once again become reacquainted with. Mr Teys says that, without the Howard government’s R&D assistance, Snapsil would not be the innovative, successful and growing business that it is today. In fact, it is a leading business light on the Sunshine Coast and Mr Teys has found himself, through his experiences, able to give advice on such matters to other individuals and businesses.

This bill does not recognise adequately the need for R&D support. It purports to increase the tax concessions available to business for spending on research and development, yet the conditions that must be met before a business qualifies for the assistance are so strict that the government support for this vital sector of industry will actually fall overall. Along with my colleagues, I urge the government to reconsider its attitude to research and development support for business and industry—it is support that generates positive returns that are worth many times the value of the initial government outlay. It is interesting that the bottom line to the budget of this program, from the point of view of the government, is that it is budget neutral. However, it could be suggested that, contrary to this, it is actually economy negative if it restricts the development of new goods and services here that would have a positive multiplier effect on Australia into the future.

Snapsil produces and distributes some quirky and innovative packaging solutions. The various products are one-use containers, dispensables, squeezables and cutlery that have built-in storage reservoirs. These are extremely practical ideas that are gaining interest world wide. For example, there are stirrers that include in the handle a serve of sugar, cutlery that includes an inbuilt serving of sauce, small candy dispensers, one-off dispensers for handyman jobs around the home, and the like. There are many interesting products and I encourage members to check out the Snapsil website at www.snapsil.com. It is an interesting and innovative firm and I am proud of the effort they have made to be such a success. But Mr Teys is adamant that his company would not be where it is today without research and development support.

This bill works to decrease the number of activities that qualify for research and development support; it introduces confusing changes to definitions for eligibility; and it makes it more difficult for firms to apply for and to qualify for that support. The difficulties in actually making such applications will in the longer term reduce the number of firms that apply and also reduce the amount of the funding that this government actually outlays, which highlights a sneaky revenue-raising aspect of this disappointing Labor government bill. This bill is not an improvement to the current system and actually represents a slide backwards in support for those individuals and firms that are seeking to be innovative and to create new products and services. As a nation we need to better fund research and development, not cut back on support. We have been fortunate in recent years that expenditure on research and development has steadily increased, from some $108 million in 1985-86 to over $17 billion in 2008-09, and it is important that the developments represented by those investments and by that growth over those 25 years are able to be encouraged and continued.

The opposition is very happy to support research and development. We do not make any apology for that but we would ask the government to very seriously consider the amendments so ably moved by my colleague at the table, the honourable member for Indi. If these amendments were accepted then obviously the bills would be vastly improved and the original purpose of research and development would be enhanced and made much more effective. In fact, our economy would be enormously strengthened if the government took note of the approach taken by the honourable member for Indi.