Towards 3% R&D e-book available now – BDO experts call for cut in red tape

@AuManufacturing’s new report on its editorial series Towards 3% – turbocharging Australia’s innovation efforts has hit a nerve with readers (you can download the free e-book below). Here @AuManufacturing sat down with Ryan Pollett and Nicola Purser from public accounting, tax, consulting and business advisory BDO, to understand the importance of the series and report.

@AuManufacturing: What did we learn in the series Towards 3% – turbocharging Australia’s innovation efforts?

Ryan Pollett and Nicola Purser: We’ve certainly learned that Australia has a high calibre of innovation experts and thought leaders from diverse fields. The contributions to the series have been both impressive and insightful. However, some overarching themes have stood out.

We’ve learnt that Australia needs to act on this issue sooner rather than later. The requisite will, knowledge, and skills certainly exist—just look at the series contributors. What we’re lacking is a cohesive national strategy that coordinates the private and public sectors and transcends the political cycle.

Bi-partisan commitment will be essential to our success. We have an enormous opportunity before us—let’s not squander it through inaction. The risks to our sovereign capabilities at a critical juncture in the world’s geopolitical landscape are too high to ignore.

@AuManufacturing: What needs to happen to reverse the slide in R&D?

Ryan Pollett and Nicola Purser: The biggest roadblock to reversing the slide in R&D that we see – and hear about from our clients – is the plethora of red tape – it absolutely needs to be removed before our innovation efforts and investment in R&D will ramp up.

We must take steps to encourage, not hinder, innovation – the introduction of a patent box regime, as advocated in our article for the series, would certainly go a long way towards this, in our view.

@AuManufacturing: What specific policy modifications do you favour to kickstart R&D?

Ryan Pollett and Nicola Purser: The Government has flagged another review of the R&D Tax Incentive which is Australia’s flagship programme to support R&D.

As highlighted in Kris Gale’s article ‘Tax Incentive is Alive and Kicking’, despite the best efforts of bureaucrats and bad actors over the years, the programme has been through a period of relative stability with minimal and generally positive legislative change since 2011.

However, the ATO’s attitude towards the programme is more akin to a tax exploitation scheme contributing to the tax gap rather than Government funding for R&D distributed via the tax system, in a non-partisan way. As a result, the compliance burden levied on claimants significantly reduces the value of the programme and the timeliness of funding.

Whilst we would not be advocating for any overhaul of the programme, simplifying compliance with the rules, for example by allowing safe harbours for apportionment, would go a long way to improving its effectiveness.

@AuManufacturing: Are we calling for a spending increase by the government?

Ryan Pollett and Nicola Purser: In theory – yes. But in our view, a spending increase is perhaps less important than making sure that available funds are spent in an effective, well-coordinated and efficient manner.

The National Reconstruction Fund, for example, represents a significant investment for Australia, but to date, the progress on allocating and distributing funds has been disappointing.

More funds won’t necessarily result in the outcomes we need as a nation, but better distribution of those funds just might. Of course – an increase in spending would certainly be welcome!

Ryan Pollett is National Leader, BDO Manufacturing & Wholesale, and Nicola Purser is National Leader, BDO R&D and Government Grants.

Image: @AuManufacturing