“Innovation is the most important thing to Australia going forward.”

I wholeheartedly agree with SpeeDx’s Dr Alison Todd on the patent box announced in last week’s Federal Budget and join her in urging for it to be expanded out of health and biotech.

The Budget has made both winners and losers of companies leading innovation in Australia.

The Government has lauded its own digital strategy and “investment” into the future for Australia. Prime Minister Scott Morrison said: “Australia has led the world with innovations like Wi-Fi, the bionic ear and a vaccine for cervical cancer. We want to see more innovation commercialised in Australia.”

The Opposition appears to agree with Labor leader Anthony Albanese making innovation in the form of support for training and a “Startup Year” for university students a key part of his budget reply to encourage new businesses and innovative thinking.

They are right to think this way. Innovation is not just a buzz word for tech boffins, it has practical implications for jobs, businesses and economic growth. It is an important conversation that we need to have right now to continue to educate our leaders.

We are still underinvesting in AI

But the budget itself only goes part of the way towards addressing this. The US, while a far larger country, is set to invest $6 billion into AI this year alone, by comparison in this budget Australia has increased its spend to $124 million over six year. This is just half of what the industry is calling for.

We need access to overseas talent

As the world emerges from the pandemic, we still lack access to overseas talent. Our borders are unlikely to open until next year and with recruitment in technical roles already difficult, this will increase the fight for talent.

But ESS will help us retain talent

The changes to employee share schemes, where tax will no longer be payable on shares when an employee leaves the business, will help encourage take up of this scheme.

This artificial taxing point in many cases forces the former employee to sell the shares to meet the tax liability and acts as a deterrent.

Patent and software write downs will help

There are more positives for the tech industry. The new patent and continued software write-downs will go some way to encouraging uptake of innovation and allow companies more ability to experiment.

As accountants have advised, the current rules have become outdated and are not keeping pace with what happens in reality, especially with software.

At the moment if you acquired a patent, you would need to claim the cost of that patent over 20 years.

Under the new rules, you will be able to self-assess the actual effective life of that patent and instead claim the cost over those years.

This same rule will also come into effect with in-house software in July 2023. What that will mean is that if it’s going to be obsolete in two years then you now claim over those two years.

What we really need

Kickstarting an “innovation boom” isn’t just a tech issue – this affects every industry from construction, medicine to finance.

Red Marble works in depth with industries including construction and infrastructure, so seeing strong investment into these sectors in the Federal Budget is encouraging.

Australia’s politicians have been cautious of overtly supporting the emerging tech sector and the optics of creating tech billionaires.

Our concern is politics getting in the way of the opportunity created by the current pandemic and its recovery on a global scale.

In its reply Labor has criticised the Government for making this a pandemic patch-up budget rather than a committed plan for Australia’s future.

Waiting years to invest in artificial intelligence, technology and supporting emerging companies in Australia may end up putting us further behind the rest of the world.

We need to open more conversations with our leaders so they can understand what is truly at stake in this budget and beyond. Aren’t we already far enough behind?