Private capital welcomes innovation economy budget

The Australian Investment Council has welcomed the federal budget promoting investment in the innovation economy.

Chief executive Yasser El-Ansary said this focus would help create new jobs and new industries which would drive future economic growth.

Ahead of the budget, the council – which represents private capital – had called for the government to make developing the innovation economy a priority.

“Pleasingly, we’ve seen the government take decisive action to do just that,” El-Ansary said.

“The new digital economy strategy, along with announcements about measures to attract more global talent, and changes to our investment regimes and tax incentives such as the ‘patent box’ will create opportunities for domestic and offshore investment capital to support the economy – which is essential for our future prosperity.”

An outline of the planned ‘patent box’ incentive was included in papers accompanying the budget handed down by Treasurer Josh Frydenberg on 11 May.

El-Ansary said the incentive, which is to be introduced from July 2022, will encourage investment into Australian medical and biotech research discoveries and had potential to accelerate the biomedical commercialisation pipeline.

“The council looks forward to working with the government on the development of the patent box regime to ensure that the new framework delivers significant new gains to the innovation economy,” he said.

The budget also seeks to address long-held concerns of private capital fund managers that Australia’s tax system, or the way in which it is administered, discourages investment from overseas.

A new ATO ‘concierge’ system is to be set up to assist offshore investors navigate the tax system.

“As a net importer of capital, Australia is reliant on offshore capital to grow our home-grown businesses,” El-Ansary said.

He said the new regime could improve access to offshore private capital by helping overseas investors gain certainty on how Australian tax laws would apply to specific investments.

Under the federal government’s new digital economy strategy, both the Venture Capital Limited Partnership (VCLP) and Early-Stage Venture Capital Limited Partnership (ESVCLP) regimes are to be reviewed.

El-Ansary said the council supported the review and looked forward to working with the government to identify how the collective investment vehicle regimes could be updated to help in the generation of a more competitive and innovative economy.

The council welcomed announced changes to the taxation of employee share schemes.

“These schemes play a particularly important role in remunerating and incentivising staff of early-stage innovative businesses which often have limited financial and cash resources but need access to highly skilled labour,” El-Ansary said.

He said an announcement that an internationally competitive corporate collective investment vehicle was to be introduced was welcome but called for a limited partnership collective investment vehicle to follow.

“We call on the government to move to introduce the limited partnership collective investment vehicle once the corporate CIV is finalised,” El-Ansary said. “A new limited partnership CIV will lead to a significant lift in private capital investment in Australia from domestic and offshore sources which will drive new innovation and an acceleration in our transition towards a more knowledge-based economy.”

El-Ansary also welcomed the objectives of the Global Business and Talent Attraction Taskforce.

“The fast-tracking of permanent residency for 5,000 people a year through Global Talent and Temporary Activity visas will modernise the framework for individual tax residency,” he said.

“To be internationally competitive, highly innovative fast-growth Australian businesses need access to world leading talent in key areas where we are still building local capability. We’ve seen too many examples over the years of domestic businesses that cannot access talent and capital being forced to relocate overseas taking with them highly skilled jobs and economic activity.”

El-Ansary said Australia’s public health response to COVID-19 had given the country a competitive edge in the economic recovery and we needed to take full advantage of this.

“We must ensure that the economic recovery is underwritten by big gains in innovation and technology to drive increased productivity,” he said. “Attracting the world’s best businesses and talent to Australia will help boost our domestic productivity and our global competitiveness.

“Skills and talent are the lifeblood of growing and innovative businesses. Australia has a unique opportunity to be a destination of choice for high calibre talent through its attractive lifestyle, stable political system and future growth opportunities.”