Wednesday, 03 April 2019 09:10

Budget R&D tax incentive cut disappoints start-up sector Featured

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Rebecca Schot-Guppy: "We continue to say it, the R&D tax incentive is incredibly important for the growth of the fintech ecosystem and technology sector." Rebecca Schot-Guppy: "We continue to say it, the R&D tax incentive is incredibly important for the growth of the fintech ecosystem and technology sector." Supplied

The Federal Government has cut another $1.35 billion from its research and development tax incentive over the forward estimates, according to the Budget papers.

This adds on to a sum of more than $2 billion that was cut in the previous budget, with that instrument aiming to save $2.4 billion on the scheme over the following four years.

The R&D tax incentive is the main vehicle for the government to reward innovation and there has been a reduction of more than $4 billion in the last two budgets.

Last week, the head of the Australian Information Industry Association, Ron Gauci, said the lack of an effective Research and Development Tax Incentive was one of the factors holding back the local ICT industry.

He said if an effective R&DTI program were in place, it would create an environment that would encourage innovation, commercialisation and export of high-quality Australian AI products and services.

“The creation of a favourable business environment where Australian industries are empowered to innovate, develop and deploy AI solutions, and contribute to Australia’s overall productivity, is essential to Australia’s continued economic growth," he said.

Asked for comment about the cuts to the R&D tax incentive, the general manager of FinTech Australia, Rebecca Schot-Guppy, said: "Fintechs and start-ups will be disappointed by this budget. It’s supporting the jobs of today, but not the jobs of tomorrow. Whatever happened to Australia becoming the innovation nation?

"We continue to say it, the R&D tax incentive is incredibly important for the growth of the fintech ecosystem and technology sector.

"Easy access to it consistently polls as the number one issue for growing a fintech in Australia. Now, fintechs will be forced to compete with major companies for a dwindling pool of capital. Considering all the turmoil this policy has gone through, this could not be a worse outcome.

"We are heartened however to see progress on the e-invoicing front, expansion of the export development grant and [we] also support further tax cuts and the increase to the asset write-off. All of these initiatives are great for emerging businesses."

Another person who was disappointed at the R&DTI cuts was Michael Capocchi, chief executive of mobile satellite device designer Beam Communications.

He said he had hoped the government would do more to support Australian innovators like his company who hire highly skilled local engineers to design mobile satellite equipment.

"Beam Communications has actively utilised the R&D program with great success as it has enabled to be at the forefront of developing and launching many world first products utilising local talent and resources," Capocchi said. "The R&D grants drive innovation as well as encourages the employment of local talent and I think it’s a missed opportunity for the Federal Government not to offer more support in this area.

“I was also hoping that the government would offer more support for us to export our products, particularly now as we are about to launch a new range of satellite and 4G devices.

"While it’s great that the government is putting aside $60 million in export grants, we can’t apply for any of it as there is a cap on the number of Export Market Development Grants we can apply for, and we’ve used them up for our existing portfolio of products.”


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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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