///Four key ways to grow Australia’s manufacturing capability

Four key ways to grow Australia’s manufacturing capability

Ahead of the Federal Budget on Tuesday, the AAMC urges tax reform and a redefinition of what constitutes a small business.

Our 2016 Pre-Budget submission and recommendations, submitted in February, are aimed at ensuring Australia captures value as global competition for high value industry intensifies.


Australia’s advanced manufacturers are the engine room of our innovation economy,” the AAMC submission notes.

Yet a AAMC study of Australia’s competitiveness in terms of innovation tax incentives, How Australia Compares, found Australia lagging in tenth place out of 12 comparable nations studied.

The United Kingdom has its “Patent Box” which enables companies to apply a lower corporate tax rate – 10% – to profits earned from its patented inventions. Switzerland is proposing a License Box incentive to provide reduced rates of tax on IP-related profits, while Ireland, Singapore and Canada are reducing overall corporate taxes to attract foreign investment in advanced manufacturing.

Significant technological shifts are occurring in manufacturing, with robotics entering a new phase and significant advances occurring in nanotechnology, 3D printing, genetics, biotechnology, chemistry and materials science.

Companies must keep pace to remain globally competitive. This requires accelerating the uptake and development of technology and processes across industry.

Budget-ImageThe AAMC details four key ways the government can help grow business capabilities in Australia: Growing Small Business, Fostering Industry Capabilities, Encouraging “beyond the usual” R&D, and Creating and retaining new industries.

The AAMC recommends redirecting the Automotive Transformation Scheme monies to the Growth Centre Machine to help grow small business, noting that: “The Growth Centre machines are already built; they just lack petrol. Sufficient funding will help guarantee their success.”

It also recommends revising the definition of “small business” from current $2 million revenue or less per year to $20 million, to better allow Australian small businesses to operate on a more level playing field versus overseas competitors.

There should also be an expansion of the Federal Government rules of accelerated depreciation on new plant and equipment, and adoption of international accounting practice for amortisation of intangibles by recognising all forms of IP as depreciable assets, and including goodwill and trademarks in these definitions.

To encourage “beyond the usual” R&D, the AAMC recommends expanding the recently announced “Business Research and Innovation Initiative” to emulate the successful Small Business Innovation Research (SBIR) Scheme in the United States.

“In order to effect a step change in collaboration between business and publicly funded researchers, double the R&D tax incentive for R&D that is done in collaboration with an approved Australian Research Institute or university,” it says.

The of R&D incentives could also be improved, such as the Government’s decision in December 2015 to initiate a further review of the R&D Tax Incentive.

“The AAMC strongly supports government tax incentives that effectively encourage greater commercial outcomes for Australian innovation and research. We believe a well designed R&D tax incentive – and associated measures – will be critical for driving innovation and growth in advanced manufacturing. “

Finally, and importantly, the AAMC recommends introducing an Advanced Manufacturing Innovation incentive scheme to attract and maintain high value manufacturing in Australia.

This would effectively provide a reduced corporate tax rate on incremental income from qualifying activities. Applicants would be required to submit plans for substantive commitments in manufacturing or for expanding knowledge-rich activities or capabilities in Australia.

The government will hand down its Federal Budget on Tuesday.

2018-01-09T11:59:20+11:00 April 28th, 2016|