Venturous Australia: innovation review released

The Cutler review of the national innovation system has recommended replacing the current R&D tax concession package with a tax credit of 40 per cent to stimulate business spending on R&D.

It has also recommended a competitive innovation grants program for high-risk businesses at the proof of concept and development stages, targeted at programs identified as national priorities.

The grants would have to be repaid by successful companies from royalties or sales revenue. The program should be aimed at assisting 200 innovative companies each year at a cost of $150 million.

The review also recommends that the COMET program be expanded for five years with a funding increase of at least 25 per cent.

Another recommendation for start-up businesses is a second round of pre-seed funds worth up to $1 million, capped on the first tranche of investment, as opposed to the absolute cap of $1 million currently.

This would recognise the high risk nature of early stage investments, the report states. It recommends the establishment of four new funds at a cost of $100 million over 15 years.

Small grants for angel investors are also recommended.

The threshold at which a “small firm” is defined should be lifted from $5 million to $50 million, and the panel recommends removing the expenditure threshold on R&D altogether.

In what will be very welcome news to the public research sector, the review recommends an urgent restoration of public funding levels for research in universities and government research agencies.

It calls for the adoption of full funding for the costs of research at universities and increased funding for universities and government research agencies such as the CSIRO and ANSTO, "so that by 2020 we match the top quartile of OECD countries in public expenditure on research and development,” the report states.

The cross-subsidisation of research from teaching is strongly criticised. The panel accepts that full funding will require a much higher investment by government, but says this will make up for the decline in government support to below OECD average by the Howard government.

It also recommends a National Innovation Council – or a “central brain” – to co-ordinate and provide strategic leadership for the whole innovation system. This council would replace the current Prime Minister’s Science, Engineering and Innovation Council.

The report also provides a boost for the open-source publishing movement and those seeking to revise patent laws.

It also recommends that the principles of innovation be applied to the public service.

The full review is available from the Department of Innovation’s website Department of Innovation’s website

Analysis and industry reaction to come.