The initiatives in Malcolm Turnbull's innovation statement are a good first step, but what's stopping Australian IP moving offshore?
The initiatives in Malcolm Turnbull’s innovation statement aim to boost entrepreneurship and innovation within the Australian economy. It’s a good first step towards creating a more stable tax environment for start-ups and SMEs, and encouraging collaboration between researchers and industry and investment in early-stage businesses. Many of the initiatives are predicted to drive innovation within the Australian economy. However, what was missing was the government’s proposed actions to stop IP moving offshore.
Innovation is a cycle that moves from the start-up phase to the growth phase and finally to the commercialisation phase. While the innovation statement is specifically focused on creating a better environment for businesses in the start-up phase, without a correlating policy aimed at retaining successful innovations onshore, the benefits will not be fully realised by the Australian economy. Without such a strategy, countries with more attractive IP tax regimes will reap the benefits of commercialising our home-grown R&D on their soil. An example of an attractive IP tax regime is Ireland’s system, Knowledge Box, which offers a 6.25% tax rate on profits derived from the commercialisation of R&D developed in Ireland. When you compare that to Australia’s 30% tax rate, you can see why companies such as Atlassian and CSL have moved their IP offshore.
The hope is that, as Malcolm Turnbull noted when announcing the innovation statement yesterday, these initiatives are not a one off announcement but part of a broader policy agenda. As these policies yield success, the government should focus on how to encourage successful Australian inventors to keep their IP in Australia.