R&D funding fell by $4 billion and explorers, tech are suffering

With the Morrison government obsessed with achieving the first budget surplus since the GFC, research and development schemes suffered substantial cuts in April’s budget.

A report at the end of August showed total cuts amounted to $4 billion. Shadow minister for industry and small business Brendan O’Connor labelled the investment figures “dismal”.

Since the turn of the month the start up scene has become more vocal about R&D cuts as well as Australia’s lack of investment in technology.

Australian Computer Society president Yohan Ramasundara declared last week that we had to elevate our tech heroes to the stage of sporting greats. This followed a report suggesting Australia would need 100,000 more technology workers in the next five years.

Mark Burgess, CEO of aerospace manufacturer Quickstep (ASX:QHL) wrote an op-ed for InnovationAus where he made similar comments about technology needing to be part of Australia’s identity.

“Australia can no longer afford to be thought of only as a place of sunshine, beaches, unusual animals and amazing natural wonders,” he said.

“We have to attract foreign customers, foreign investors and foreign talent with a narrative that talks to our inventiveness, innovation and skills of which we have many.”

Burgess did admit though that this would not be a quick fix. Another thing he said had to change was promoting intra-state competition. He called for a national approach to innovation encompassing both the federal and state governments.

Give back the cash

There has been much controversy surrounding the R&D Tax Incentive. Company’s, including ASX small caps, that have been granted incentives are having to repay them.

One of these was Argent Minerals (ASX:ARD) which was ordered to pay back $1.4 million in January.

A review of its claims is ongoing but as a sign of good faith it is paying $5,000 per month until the review is complete.

Junior explorers rely on the assistance of the R&D incentives to help them advance exploration projects, particularly when investor cash is difficult to acquire and a project is technically challenging.

Other private businesses have been more vocal. One told MyBusiness this claw back was “the most atrocious prosecution of an industry sector in years”.

Complaints led to a review, which was announced two weeks ago.

ATO Commissioner Chris Jordan said at a regulators panel last month that businesses had dressed up bids to qualify.

To truly make it they had to be “pretty innovative”; it was not enough to just be an app.

“There seems to be a belief that if I’m a start-up and I’m in software and I’m going to develop an app, the simple answer is I qualify,” Jordan said.

“There are definitions and there are requirements, and there are a lot of apps around these days, so you’ve got to be pretty innovative to qualify, in terms of new ways of doing things. Having a new subject matter for an app [is] not really within the definition of R&D.”