The economic benefits of software R&D


Nick Therkelsen-Terry
Contributor

Confirmation this week that the Federal Parliament has passed into law the research and development tax incentive (RDTI) will come as welcome news for the thousands of organisations which dedicate themselves to helping Australian companies be more productive by commercialising brilliant innovation.

Ensuring that the RDTI scheme remains intact is a great start and will provide certainty to a sector which boasts more than 11,000 organisations. It should also be good news for anyone who understands how important technology research, development, and commercialisation will be to the prosperity of Australia’s economy in the next 50 years.

Federal Industry, Science and Technology Minister Karen Andrews is to be congratulated for her insight and belief in supporting research and development. It’s great that Australia has politicians at the federal and state level who are willing to fight for technology-based industries which contribute to productivity and national competitiveness (not to mention thousands of highly paid jobs).

Nick Therkelsen-Terry
Nick Therkelsen-Terry: Chief executive of AI software leader Max Kelsen

The creation of the Queensland AI Hub, with support from the Queensland government, proves that good ideas are being supported by both state and federal governments.

What isn’t necessarily being discussed enough, however, is what happens next.

First, we need to continue to test the applicability of how such tax incentives work. For example, as good as the retention of the scheme is, the issue of what incentives are provided for software development versus pure research remains a vexed issue.

As a leader in R&D for applied machine learning and artificial intelligence, we don’t believe all software investments should be subject to tax write-offs. A lot of software developed by large companies is used to keep the lights on and should not be subject to tax incentives.

Rather, we need to evolve the conversation, so industry and policy makers have a clear agreement on what software is developed for innovation and where genuine risk is taken for a commercial outcome.

We are calling therefore, for a new multi-factor approach to be developed to clearly identify and classify software that is related to R&D and for governments to incentivise its use.

This will, over time, drive lower compliance costs for those accessing the scheme and lead to more successful development and commercialisation of Australian technology used in mining, manufacturing, retail, banking and insurance and of course, human life sciences research.

This focused and balanced approach would help turbocharge the application of commercially focused R&D as a driver of national productivity, jobs growth, and economic prosperity.

If we want more Atlassians, we need to incentivise companies to develop and commercialise their research. So, yes, we welcome the confirmation of the RDTI scheme, but it needs to be enhanced over time.

With greater certainty, more investment will be made by the private sector into the entire R&D value chain, and we will, as a nation, stand a better chance of commercialising the wonderful innovation Australians are so good at.

Currently, the environment is still not comparable in that sense with Silicon Valley, for instance. That has to change.

If we want to, as an economy, to improve our flat multi-factor productivity, we need to encourage the creation of an entire ecosystem of applied software commercialisation. We have the smarts; we have the lifestyle to keep smart people here.

Sharing some of the risk of commercialisation would encourage the kinds of highly skilled people we need to move to or return to Australia, and avoid us losing the opportunity to become a world leader in this area of applied technology.

Secondly, now is the time for our policy makers at the state and federal level to work with industry to secure Australia’s future as a global leader in the commercialisation of quantum computing, one of the most revolutionary technologies being developed.

Quantum computing has been estimated to be worth more than $US32 billion by 2030. It stands to unleash a revolution in how we compute ideas faster and at a scale we can barely imagine – with applications to medical science, astronomy, car manufacturing, finance food production, resources industries, and beyond.

What’s not well known, though, is Australia is a global leader in quantum computing, an industry which would benefit from a clearer plan for how we incentivise software development.

There are dozens of Australians leading projects for global technology companies in the industrial application of QC. These people should be working in Australia for Australian companies. We need a national quantum computing strategy.

It’s encouraging to see that CSIRO recently published a paper outlining a roadmap for the creation of this industry, which it claims could contribute $4 billion to the economy by 2040. National strategies for quantum computing are being developed in many European countries.

Does a national strategy in Australia sound too ambitious?

Nick Therkelsen-Terry is the CEO and co-founder of Max Kelsen, one of Australia’s leading Artificial Intelligence (AI) and Machine Learning (ML) solutions businesses.

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