There are growing calls in the public and private sectors for the government to introduce a collaboration premium for the research and development tax incentive to help turn around Australia’s research commercialisation performance.
Both the recent Ferris-Finkel-Fraser review of the research and development tax incentive (RDTI) and Innovation and Science Australia’s 2030 report recommended that a collaboration premium of up to 20 per cent on non-refundable tax offset should be introduced to incentivise collaboration.
But the government has not included the premium in its legislation that gives the RDTI a $2.4 billion haircut, saying that it would “not be an efficient allocation of resources”.
Now, several submissions to the senate inquiry into the legislation have called on the government to introduce the premium in order to address Australia’s struggles in commercialisation and to improve collaboration between the private sector and public institutional research.
In its submission, Science and Technology Australia said such a premium was required in the face of falling R&D spends by businesses in Australia.
“A targeted research collaboration incentive for those enterprises would provide them with an incentive and a catalyst to undertake research that they previously would not have been able to afford. Beyond providing access to research for small and medium enterprises, collaborative research also provides significant gains,’ the submission said.
“The advantages of cross-sector collaboration and the projected $2.4 billion in savings from tightening the RDTI provides the right conditions to introduce a 20 per cent collaboration premium through reinvesting projected savings into business-led innovation.”
The University of Melbourne also called on the government to introduce a collaboration premium, saying it was “disappointing” that recommendations from several reports and organisations had been ignored.
“It is disappointing that the government has chosen not to follow the recommendation that came out of the expert review of the R&D tax incentive,” the university’s submission said.
“A premium incentive rate for businesses that engage research institutions to conduct R&D would help ensure an optimal return on the public investment and advance the aims articulated in the government’s National Innovation and Science Agenda,” it said.
“The University of Melbourne urges the government to implement the collaboration premium recommended in the review of the R&D tax incentive. This would ensure that the program’s design reflects the policy intent of encouraging additional R&D activity, and that it better contributes to Australia’s collaborative research ecosystem.”
In a separate submission, Universities Australia also backed the idea of a collaboration premium.
“Universities Australia is concerned by the disconnect between government policy that encourages business and university to work more closely together, yet provides little support to businesses who wish to take advantage of Australia’s world-leading university R&D capability,” the submission said.
“The introduction of a premium rate to the RDTI for businesses that collaborate with universities and publicly funded research agencies would encourage business to access expertise and resources inside these institutions, which would have the effect of significantly increasing the spill-overs associated with both public sector and business R&D.”
In the explanatory memorandum for the bill – including changes to the RDTI – the government attempted to explain why it had chosen not to introduce such a premium.
“The collaboration premium may be limited in its ability to effectively increase the level of collaboration. While the collaboration premium would reward companies for collaborating with publicly funded research organisations, it would not address the significant cultural and structural barriers to collaboration,” the government said.
“A collaboration premium also creates the potential for distortionary impacts and rorting. For example, a company with the internal capability to undertake R&D may choose to outsource the activity simply to receive a higher benefit rate. This would not be an efficient allocation of resources.”
But in its submission, the University of Melbourne rejected this calculation, saying that the premium would “deliver incremental gains in breaking down cultural barriers between research and industry”.
“Greater familiarity between industry and the research sector would build over time as businesses respond to the heightened incentive introduced through a premium rate,” it said.
And there is “no serious prospect” that the scheme would be rorted, it said.
“This concern is not consistent with a recognition of the nature of the economic impact that research collaboration between business and the research sector promotes. Given this, there is no serious prospect of large numbers of businesses engaging the research sector to conduct R&D without this driving the intended cultural shift and economic benefits,” the University of Melbourne said.
The $2.4 billion in savings expected to be reaped from the RDTI changes should be invested in a non-medical Research Translation Future Fund to directly support translation research, Science and Technology Australia said.
“While STA stands by the importance of the RDTI, we also recognise the need for more direct government investment for business-research collaborations. Direct investment in collaborative translational research, provided alongside the RDTI, would go a long way to improving the incentives for business to invest more in Australian research,” the submission said.