In a week’s time, on 29 March 2022, the Federal Budget is being announced. This timing is earlier than usual due to the likely announcement of a federal election in May. After two budget cycles during the COVID-19 pandemic, the war in Ukraine and the recent floods in NSW and Qld, this year’s budget is likely to be an austere one.
The mid-year budget figures late last year were quite bullish and more positive than expected, but came before the full effect of the Omicron variant could be felt. Limited spending in this year’s budget is expected, with hopefully significant ongoing investment in health, mental health and education.
Whilst the economy is showing areas of positivity, and even growth, here’s our budget wishlist designed to continue Australia’s leading innovation standing through a strong research and development (R&D) pipeline.
Further investment into the EMDG program is required for companies to continue to invest in R&D. We’ve spoken previously about the Changes Announced to the EMDG Program and the limited benefit companies can now expect from the program in the future. Investment is needed to properly fund Australian businesses in their effort to develop markets for their innovative products and intellectual property. The program has been, and must continue to be, a vital part of the export journey for Australian enterprises.
The provision of large scale grants have been short on the ground, particularly the promised Modern Manufacturing Initiative (MMI) grants. Recent history shows it is short sighted to neglect investment in the Australian manufacturing landscape, and these larger grants could provide companies with the means of purchasing plant and equipment needed for commercially viable expansion of Australia’s manufacturing capabilities. To support the implementation of future innovation, more money for this initiative needs to not only be announced in the budget but also allocated to companies in the coming year.
The Research and Development Tax Incentive (RDTI) program is stable and has bipartisan support into the future which is good news for many companies. Apart from the large scale initiatives, there are further opportunities to ease the burden of R&D costs through smaller, administratively straight forward ‘innovation voucher’ type grants. Announcing such grants in the upcoming budget would directly help companies with some of their R&D cost burdens.
The introduction of temporary full expensing has permitted R&D entities to accelerate depreciation of certain assets, and claim the RDTI for the decline in value resulting from their use in R&D activities. This has provided a significant enhancement to the R&D tax program for the 2021 and 2022 financial years, and encouraged Australian companies to invest further in their R&D activities. As a successful initiative it would be beneficial to Australia’s R&D pipeline to see this carried forward.
As a connotation for forward-thinking, future and technology, the word ‘innovation’ gets bandied about in budgets every year. However, when delving into the detailed papers, genuine financial support or long term roadmaps to achieve true innovation is often not found. To maintain an R&D pipeline and grow Australia’s reputation for innovation, it is critical the government sees beyond the next election and actively invests and realises the value of Australia’s innovative community. With our Business Expenditure on R&D (BERD) and Government Expenditure of R&D (GERD) as a measure of GDP constantly flagging behind many OECD countries, sincere, long term bipartisan support of R&D investment is needed to help Australia move forward with progress and prosperity.