Luke Simpkins (Cowan, Liberal Party) Share this | Hansard source

I rise to speak on the Tax Laws Amendment (2009 Measures No. 4) Bill 2009. As we have heard, there are five schedules in the bill. Schedule 1 deals with increasing the research and development expenditure cap for determining eligibility for the R&D tax offset from $1 million to $2 million. It is known that the R&D tax offset is available for certain companies that undertake expenditure on eligible R&D activities totalling less than $1 million per year. Schedule 2 is about improving the integrity of prescribed private funds. This schedule will see the administration of a prescribed private fund, a PPF, ensuring complete regulatory control over the PPF by the ATO. PPFs are prescribed by the Governor-General, but this change will remove the need for the Governor-General to do so and will rename PPFs to private ancillary funds, known as PAFs. The schedule will result in these funds being placed under the same regulations as other public fundraising bodies.

Schedule 3 is about providing capital gains tax relief to members of friendly society that demutualise. Friendly societies are bodies that provide a combination of services such as private health insurance, life insurance, aged care and other services for members of the society. In the case of insurers demutualising, members are given cash or shares and are not subject to capital gains tax. Those arrangements are not the same for friendly societies that, when paying cash or providing shares upon demutualising, have no protection from CGT. This schedule will change that and extend the capital gains tax protection to those benefiting from the demutualisation of friendly societies. Schedule 4 will allow for the losses of an entity joining a consolidated group to be transferred to the head company of that group. Schedule 5 has simply minor tax amendments addressing errors and anomalies within existing tax legislation.

I would like to speak specifically on Schedule 1, with regard to the research and development achievements in this country. I have obtained some information from local Cowan business Tieline Technology. Tieline are a leading research company meeting world market demands with modern technology, and they have been doing so for more than 10 years. They have a strong commitment to research and that has been rewarded with their market position. Risk is always a major factor for all research companies. There are always many hurdles to jump, and these come at a huge cost in time to market and in money. R&D taxation schemes are essential aspects of helping business mitigate the risks involved. Tieline employ a team of specialist software and hardware engineers to develop products that are sold into the world broadcast radio and television markets. The team has been responsible for attaining a key award at the 2009 show of the National Association of Broadcasters in the US for a new product that it calls Bridge-IT. Bridge-IT will enable users to transmit broadcast quality low-delay audio between two units anywhere in the world using the internet as a carrier. Two awards were granted in recognition of the Bridge-IT product.

Tieline is a very good local company, and I appreciate their boss’s views on the needs of business. He has told me that while he appreciates any extra R&D support, the business remains subject to staff costs, new government regulations in the work environment and this government calling only firms of fewer than 15 employees small businesses. In fact on this point he believes that 30 employees should be the mark. He also raises the very interesting point that turnover of less than $10 million should be the mark for a small business, that between $10 million and $100 million should be the mark for a medium business and that above that should be the mark for a large business. Above all, this is a business that just wants the government to stop their intervention and allow it to get on with innovation, creativity, jobs and economic prosperity for Cowan, Perth, Western Australia and Australia.

I also received the perspective of David Lockett, of the Western Australian Tourism and Accommodation Guide. They are Western Australian software developers and have developed worldclass software applications and are preparing for sales around the world. Mr Lockett tells me that they have for years been heavily involved in research into new technology, together with the social and economic implications of that technology. They are not alone in this research and development but have worked with other technology developers both here and overseas to identify the best practices and the markets for those products now and into the future. That being said, I thought that I would relay the views of David Lockett regarding research and development in Australia. They have determined that there is a potential multibillion dollar global market available to innovative Australian software developers. David has also formed the view that most successful Australian software developers will probably relocate overseas because the Australian government and business sectors are far too slow in adopting new technology. He attributes this loss, and the potential loss to Australia, on a culture in which those of influence, including influential organisations, fail to take seriously the need for change and often appear to be unaware that significant changes have taken and are taking place. He attributes this to a society that has relied on protectionism and long-established, near monopoly media organisations delivering information and educating the population about important developments that are taking place around the world. He also comments that senior career public servants and politicians who do not possess relevant experience frequently have the attitude of ‘we know best’ and in effect listen to no-one other than themselves and their closest advisers.

Although Mr Lockett’s attitude towards Australia’s willingness to embrace innovation is concerning, it is probably held by many others. Their applications are being developed and tested in Western Australia although they are planning to target overseas markets after testing and the trials have been completed over the next few months. He believes that breaking into Australian markets and changing entrenched local attitudes is very difficult when compared to overseas markets, where individuals are often more effectively educated about important global developments and where individuals and organisations are frequently more open to new information. This will probably mean relocating his business overseas in order to access an environment that is more innovative, is more investment friendly and is less taxation unfriendly, thereby causing Australia to miss out again on the long-term benefits obtained by countries that are serious about developing substantial technology-based economies.

David Lockett provided me with examples of Australia’s failure to embrace innovators and inventions, losing them overseas. Although I did not know it, the aero wing profile used by the Wright Brothers was actually invented in Australia by Mr Hargraves. Similarly, the first feature movie ever made was made in Australia in the early years of the 20th century. Interestingly, the original copy of that Australian made movie was recently discovered in a vault in New York, where it is thought to have laid untouched for almost 100 years. The movie, either indirectly or directly, contributed to the establishment by Samuel Goldwyn of Hollywood, in California—California at that time having a tiny population, only marginally larger than the population of New South Wales—while today in Australia the movie industry remains little more than a hobby for many participants. This is to say nothing of Australia’s contribution to early cartoon animation, which also had to be taken to America in order to be developed by Americans such as Walt Disney. Another instance is the famous Australian-invented Sunshine Harvester. This was possibly the basis on which the massive Canadian based International Harvester company was founded after the original Australian based inventors sold out to overseas investors, apparently because of a lack of support in Australia.

David Lockett’s view is that the only possible reasons for these types of events can be the insular mentality of Australian bureaucrats, politicians, industrialists, investors and the monopolistic Australian media, who today have far too great an influence over what many Australians think, know and say. David believes that by the time the federal government actually gets around to encouraging, organising or authorising the development of substantial high speed internet broadband connections in Australia, it is likely that the technology promoted by the federal government bureaucrats will be obsolete and Australia will then fall even further behind already more technologically advanced countries, such as New Zealand and Taiwan, in the adoption and application of new technology.

I thank David Lockett and Tieline Research for bringing these points to my attention and allowing me the opportunity to relay their perspectives to the parliament. As I said at the outset, I support any efforts to promote research and development; however, it is of concern that the broad range of government policies are not streamlined to achieve the best in this field. It is also of concern, as David Lockett has suggested, that this country has a disturbing history of resting on its laurels and permitting a culture that is contrary to a high technology future. Tax benefits aside, it appears that our greatest challenge is to create a culture across media, business and government that embraces and honours innovation, research and technology while reducing red tape, thereby getting our innovators, researchers and developers into world markets—but from here, not by exporting expertise. This has not yet been achieved and it appears we have a great distance to go.

See this speech in context