Eric Hutchinson (Lyons, Liberal Party) Share this | Hansard source

I rise to speak on the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016. I note the comments of the member for Chifley. As I have done in person, I congratulate him on his performance on Q&A a number of weeks ago, along with Assistant Minister Roy, a panel of angel investors and the chap from the University of Sydney involved in quantum computing—I cannot remember his name. It was an extraordinary episode of that program. As I mentioned to the member for Chifley a few weeks ago, I thought it was very constructive and cooperative. It showed what can be achieved with bipartisanship.

I take the comments that the member has made in the spirit in which they were intended because this is very important for our country. Of course it is about innovation. In many respects, whilst we are focusing in this bill on start-ups and the new economy in terms of IT, technology and other things, this nation has a very proud history of being innovative in a whole range of areas. We have had to be innovators by virtue of our geography. In agriculture we have had to be innovators because farming in a country like Australia is not always easy, as you well understand, Mr Deputy Speaker Scott.

I note last week in my home state of Tasmania the investment of taxpayers' money in a monitoring program has attracted additional funds from Bosch Ltd—obviously, a corporate entity. The program is called The Yield, which is about sensors put in fish farms, aquaculture and agricultural settings. Indeed, the catalyst that was provided in this case by taxpayers has now seen additional funding come from a corporate investor.

I note the member's comments in respect of angel investors. He talked about an investor strike. The fact of it is that no investor seeing a good idea in front of them would delay that investment. The notion that a tax deduction or a tax incentive would be justification for not putting money into a good project, an investment that has merit, I think really would not stand up to scrutiny. Indeed, if the investment is good enough the money will flow.

This is very much part of this government's overall plan to transition the Australian economy from the mining industry—itself a very innovative area. Through the construction phase of the mining sector and the jobs it created this country prospered very much. Australia is a leader in innovation within the mining sector. We export that knowledge and those services all around the world to this day and will continue to do that. We have been a global leader for many years in these areas, but our economy is transitioning. The construction phase of the mining sector has pulled back, and we are now into a production phase. The jobs are different jobs. That is why it is very important that as a government we are seeing and are investing in a whole range of measures that will see the Australian economy transition.

Not least of all of those is the Innovation and Science Agenda, which is designed to help develop the skills that are going to be increasingly required for the jobs of the future, for my children and my grandchildren. It is also about supporting great Australian ideas and bringing those ideas to market. This country has a very proud history in R&D, but our track record within the OECD is not such an impressive one in commercialising those initiatives and bringing to market that R&D, which is often some of the best in the world. Perhaps that will change following the investment and announcements we have seen this week in relation to the defence industry plan, which will allow so many small and medium businesses to participate in a very significant investment in very smart and high-tech jobs that will be a support to the Australian economy for many years to come.

We are supporting small businesses, which of course also means we are supporting micro businesses in the area that we are discussing today. The competition law changes that we have seen in response to the Harper review over recent weeks, particularly in respect of section 46 on the misuse of market power and the introduction of an effects test, are showing this government's commitment to small business, to innovation and to encouraging that part of the economy that is so important in driving and encouraging investment within so many aspects of the Australian economy, including the IT and start-up sectors.

There are opportunities through the free trade agreements also. We will see increasingly opportunities for what we hope will be start ups that become businesses that can attract further investment, be it from overseas or otherwise, and export the products and services that they create.

I am a member of the House of Representatives Standing Committee on Education and Employment, chaired by the member for Bowman, Andrew Laming. We are in the middle of a very, very substantial public inquiry into innovation and creativity. We have had a number of submissions and have had public hearings here in Canberra. On Tuesday of last week I was in Melbourne for a public hearing for the inquiry. We have had over 75 written submissions to the committee so far. The inquiry is demonstrating the complexity of this whole space but also the interest that exists within a wide range of people, from business, through academia and vocational education and training, to angel investors and venture capitalists, who see opportunities for greater success within this area. It is a big piece of work that we have undertaken. I thank Richard and his team within the secretariat of the committee for collating the many, many submissions we have had thus far and for organising the public hearings we have had. Last week, as I say, we were in Melbourne, but the following day there were hearings in Sydney and in Brisbane.

We have a proud record of innovation and creativity, but we have challenges in respect of being able to commercialise those. One of the areas that are covered by the National Innovation and Science Agenda is the many smart young Australians who have been forced or have chosen to travel overseas to look for the greater opportunities that they believed have been available to them, particularly in the United States—in California and San Francisco, and Silicon Valley specifically—but also in other parts of the world. I think there is opportunity being created through the establishment of landing pads, whether they be in Silicon Valley or in Israel, most likely in Asia, but I think there is also opportunity to support some of those Australians who have left—and potentially international people—but who would want to come back to Australia. The opportunity to see a landing pad located here in Australia would support the objective that I think all of us in this place, not least the member for Chifley, who spoke earlier, have of unlocking the capital that is available and is looking for a place. I note that one of the real success stories in Silicon Valley is Sam Chandler. While he is a bit younger than me, he did go to the same school as me—I do not know what that says. He is a Tasmanian and we are very, very proud of the work that he is doing in Silicon Valley. We would also be looking for ways that we can attract people of his calibre to our country to support innovation and attract other people to the knowledge that he has gained in the time that he has been overseas.

These are dynamic people, and I again refer to some of the submissions and presentations that we have had throughout our committee hearing process. They are very dynamic and innovative people. It is quite extraordinary to see young people with a drive and an energy that is truly inspiring.

We have some challenges within our educational institutions. Some of the training that we are providing is not allowing these start-up companies to bring people in. While on paper they have those skills, what is happening is that those skills are not the relevant skills that many of these start-up businesses require, particularly around the IT space. We have a lot of work to do within our institutions to make sure that the things that they are learning and the courses that we are offering in this space are in line with the very fast moving changes that are occurring within these start-up businesses. The skills that they need in terms of coding are things that we can start teaching at an earlier age to our primary and high school students. These are skills that are going to be needed.

The bill before the House today and the measures announced in the 2015-16 Mid-Year Economic Fiscal Outlook are all based around the National Innovation and Science Agenda. The complementary tax incentive measures are designed to align the tax system and business laws to encourage that transition that is occurring within our economy from the production phase of the mining industry into a new economy that needs to be more diversified and a base that is based around entrepreneurship and fostering a culture of innovation.

A number of measures that the government has put in place have been tailored to innovation companies as they increase in size, value and the level of their financial activity. For example, schedule 1 of this bill gives effect to tax incentives for early stage investors. This measure provides concessional tax treatment to investment in innovative, high-growth potential start-ups through a 20 per cent carry forward, non-refundable offset on investments and capped initially at $200,000 per year. There is also a 10-year exemption on capital gains tax for investments held in the form of shares in the early stage innovation company for at least 12 months, provided that the shares held do not constitute more than 30 per cent interest in the innovation company. Indeed these are very important measures for being able to attract the right sort of staff with capacity in these areas, along with other incentives that we have made in terms of employee share schemes. These are the sorts of things that will allow start-up businesses to have the best chance of success to be able to convince angel investors and venture capitalists that there is an opportunity and a worthwhile investment to make in a fledgling business.

In respect of section 360-40, there is a list of early stage innovation companies. It is a very technical piece of legislation in respect of who qualifies and who does not. I again take note of the comments made by the member for Chifley, in terms of the support that those opposite are showing for this bill. I note, and I take them in the way that they were intended, some of the additions or modifications that those opposite believe should occur. Through our submission, through the employment and education committee as well, a number of the start-up companies that made representations also looked at the timing in terms of where a company is recognised and at what point it was considered, and, therefore, they might be eligible for such tax concessions. These are things I think that we can work on together, in a bipartisan way, over the coming months and years to make sure that we can create in this country a place where there is a culture of innovation, and foster the investment that needs to flow into the sector.

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