$1.1bn innovation package aims to bridge gap between public and private

The government’s innovation package provides funding for more than 20 programs, spread across nine ministerial portfolios. The overall funding envelope is $1.1bn over four years.

Where the money is coming from, and whether existing programs have been cut in order to pay for the new commitments, will be revealed in the Myefo budget update, expected later this month.

Some programs have no cost attached to them, while others start outside of the 2015-16 financial year.

The government has grouped the programs into four separate categories.

Culture and capital

The prime minister, Malcolm Turnbull, has argued that Australia is too risk-averse when it comes to funding startups. Around $219m of the $1.1bn package has been set aside to try and change Australians’ attitudes towards failure through providing tax incentives for investment in new businesses.

Under the changes, investors will receive a 20% nonrefundable tax rebate up to the value of $200,000 per investor per year, and a 10-year capital gains tax exemption. Venture capital investors will receive a 10% tax offset to expand startups in their early stages. The tax incentives will cost $106m over the forward estimates.

The scope of which businesses will be eligible for the tax breaks is still to be determined, with Turnbull saying the government is engaging in a consultation period before the changes come into play in July next year.

The secretary of the Australian Council of Trade Unions, Dave Oliver, said he was worried investors might “rort” the new system and leave workers and creditors “out of pocket”.

Startups will be able to apply faster depreciation on their intangible assets, such as patents, in order to bring them in line with other assets, allowing business owners to make larger tax deductions over shorter periods of time. This measure will cost $80m over four years.

Turnbull also announced the government will change bankruptcy laws in order to minimise the risk associated with launching startups. The government will introduce “safe harbours” for company directors to protect against personal liability for insolvent trading, as long as they appoint an adviser to try and spare the company financial difficulty. The default bankruptcy period will also be decreased from three years to 12 months.

“Changes to insolvency laws will help foster a culture of appropriate risk-taking,” a statement by the Business Council of Australia said. “Safe harbour provisions and reducing the bankruptcy period from three years to one strike a balance between protecting investors and creditors, while also promoting a more innovative business culture.”

The government will spend $10m over four years in establishing a Biomedical Translation Fund with the private sector for commercialising medical research, and a further $15m for a new innovation fund within the government’s peak scientific research body, the CSIRO. The fund would help companies develop technology created by the CSIRO.

Another $20m will go to the CSIRO to help expand its accelerator program, but the overall funding injection of $90m falls well short of the $115m that was taken out of the organisation when the Coalition came to power in 2013.

Collaboration

Australia has one of the lowest rates of collaboration between researchers and industry in the OECD, a statistic Turnbull said he aimed to fix.

As part of the innovation package, the government will change the focus of existing block grant funding towards collaboration. The six research block grants will be channelled into two programs: one that supports tertiary education facilities with the cost of research, and the other to train up-and-coming researchers. Block funding grants will get $127m over four years.

“We can’t let the old and more scattered approach continue to dominate the allocation of a severely rationed resource,” the chief scientist, Ian Chubb, said in a statement.

There will also be provisions in the package to measure the nonacademic impact and industry engagement of research as part of the funding determination process, at an overall cost of $9m.

The government will set aside $26m over the forward estimates period to allow greater global collaboration, too. It will create so-called landing pads in Silicon Valley and Tel Aviv as well three other yet-to-be-determined locations, so that researchers can make connections with Australian intellectuals who live abroad.

By far the largest chunk of funding – $459m over four years, with more planned outside the forward estimates period – will go towards the long-term funding of research infrastructure.

The National Collaborative Research Infrastructure Strategy, which on Monday received funding certainty to the tune of $1.5bn over 10 years, had been used as a bargaining chip by former education minister, Christopher Pyne, to pass contentious changes to university funding. Pyne, now the innovation minister, later backed down on the threat to cut the NCRIS’s funding if higher education changes were not passed.

The union representing engineers, Professionals Australia, welcomed the move away from piecemeal funding arrangements for research.

“Our scientists have been trapped in a never-ending cycle of grant applications, our spending on research is at best mediocre, and our supply of engineering graduates is so poor that we import two-thirds of the engineers we need to run the country year-on-year,” chief executive, Chris Walton, said.

Extra funding will also go towards boom industries in the tech sector, with $22m going to the funding of a new cyber security growth centre, and another $15m into developing quantum computing, hailed as the next era of computers.

“Quantum computing is a transformational technology in which Australia has an international lead, and there is now an opportunity for translating this research here in Australia,” the director of the Australian Research Council Centre for Quantum Computation and Communication Technology, Michelle Simmons, said.

Talent and skills

A further $84m over four years will go towards the study of science, technology, engineering and maths (Stem) subjects in schools, with money earmarked for promoting Stem subjects for women, and the teaching of coding to students in Years 5 to 7.

The Australian Academy of Science welcomed the extra funding for women, calling it a “game-changer” that aims to redress the gender imbalance in the sciences.

“Diversity underlies innovation. This government support will enable us to grow the diverse, talented research sector that Australia needs to create, shape and maintain the innovative society we want in the future,” Academy fellow Nalini Joshi said.

The government will also create a new visa class for innovators who wish to call Australia home. The entrepreneurial visa will not be capped, Turnbull said.

“The more high-quality, effective, productive enterprising entrepreneurs we can attract, the better because they drive jobs. Entrepreneurs create jobs,” the prime minister told reporters.

ACTU’s Dave Oliver expressed concern at news of the visa, saying the government should be focusing on training up the local workforce instead.

Government as an exemplar

Many programs in the package look at what the federal government can do to lead the way on innovation. The government will set up a new independent statutory body responsible for driving long-term policy on science and innovation, at a cost of $8m.

A new committee of cabinet, to be chaired by the prime minister, will also be formed.

A digital marketplace to help small and medium-sized enterprises to business with the federal government will be created. That initiative will cost $15m over four years.

Turnbull has reversed a decision made by his predecessor, Tony Abbott, to scrap data research body, Data61. The body is the result of a merger between National ICT Australia (Nicta) and the CSIRO’s digital research unit. Funding for Data61 was due to run out in July next year. It will now be funded until 2019, at a cost of $75m all up.

The Coalition v Labor policies

Late last week, Labor released the third tranche of its innovation strategy. There are many similarities between what the opposition announced and what the government announced on Monday, making it a largely bipartisan policy area.

The opposition leader, Bill Shorten, has long argued for school children to be taught coding, and that more teachers should be trained in Stem subjects. He has proposed to offer 25,000 scholarships for teaching graduates to take up the subjects, worth $15,000 each.

Labor also wants to see an innovation hub built in the United States, similar to the Coalition’s so-called “landing pads”, and has called for tax incentives for those investing in startups.

It also wants new classes of visas for encouraging entrepreneurial visas for graduates and other applicants, but would cap them at 2,000 visas for each of the two streams.

“They say imitation is the most sincere form of flattery,” Shorten told reporters on Monday. “There are a number of Labor ideas which we’ve been outlining since my budget reply speech [in May] which I’m pleased the see the government has adopted with a few tweaks.”

He criticised Abbott for the “degradation” of the sector.

“How on earth can you say that you are pro-innovation when you cut $3bn from research, science and innovation, and then you put $1bn back? It doesn’t really go towards filling the gap, does it?,” Shorten asked.

Labor axed funding to the science, research and innovation sector by $562m in the 2012-13 financial year, boosting it by $538m again the following year.

Abbott then kept the budget more or less steady, shaving $53m from the sector in his first budget in 2014-15. The budget estimate for science and innovation in the 2015-16 year is $315m less than the previous financial year, taking the sector’s funding to its lowest point since 2012-13.