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AMT

JULY 2015

FRoM THe

CEO

Shane Infanti – Chief Executive Officer AMTIL

Those regular readers of my column will agree that for a number

of years I have been beating the same drum when it comes to

Government support for our manufacturing sector. One of the keys to

our future is discussing these subjects and putting steps in place to

ensure the subjects don’t become constraints and barriers.

This is why I am pleased to see the Australian Advanced Manufacturing

Council (AAMC) calling on the Productivity Commission to undertake

a comprehensive analysis of Australia’s global competitiveness in

attracting and maintaining advanced manufacturing.

The AAMC Chairman, John Pollaers, was interviewed in our magazine

last month so if you did not see that editorial dig out last month’s AMT

publication and have a read of it because he makes a lot of sense.

I support John’s recent call regarding five key issues and the

recommendations that are being made, which are outlined below.

1. Encourage industry-research collaboration through

tax reform

Recommendation:

In order to effect a step change in collaboration between business and

publicly funded researchers, double the R&D tax incentive for R&D that

is done in collaboration with an approved Australian research institute

or university.

2. Support mechanisms that encourage more R&D

Recommendation:

Immediately remove the $100m cap on the R&D expenditures that

companies can claim as tax deductions, and immediately withdraw

proposals to reduce R&D tax offsets.

3. Stem the loss of Australian innovation and IP overseas

Recommendation:

Introduce an innovation incentive scheme to attract and maintain high

value manufacturing in Australia.

This innovation incentive would effectively provide a reduced corporate

tax rate on incremental income from qualifying activities. Applicants

would be required to submit plans for substantive commitments in

manufacturing or for expanding knowledge-rich activities or capabilities

in Australia.

4. Encourage investment in new plant and equipment

Recommendation:

Expand the application of Federal Government rules of accelerated

depreciation. Give a taxpayer the option of claiming accelerated

allowances as an alternative form of tax depreciation, as follows:

1. Allow all plant and machinery, except motorcycles, cars and

light goods vehicles (weighing 3 tons or less), to be written off at

33.3% over three years.

2. Grant a 100% accelerated depreciation allowance in the first

year for capital expenditure incurred on the following:

Now is the time for reform

We must have a long-term focus on building new products and new markets. This involves significant

change such as being more innovative in the way we manufacture goods, investing in the latest

technology, skilling ourselves so we create a technologically advanced workforce, looking past the

constraints of a local market and creating products that will have global demand, and positioning

ourselves in markets that we can compete in on an ongoing basis. These are all subjects that are raised

whenever any discussion on our manufacturing future is held.

– the purchase of selected new machines, equipment or systems

that demonstrably improve productivity and efficiency than

similar ones currently used;

– the installation of engineering control measures for existing

machines, equipment or processes, with the primary objective to

improve productivity and efficiency;

– the purchase of selected new equipment or systems that do not

pose a significant chemical or environmental risk;

– the installation of engineering control measures for existing

machines, equipment or processes to minimise chemical and

environmental risk;

– certified energy saving or energy-efficient equipment;

– efficient pollution control equipment or device;

– computers, robots, computer-aided machines and most other

electronic equipment.

Caps would be determined through consultation with industry. Current

anti-avoidance provisions are considered adequate.

5. Follow international accounting practice for IP tax

treatment

Recommendation:

Recognise Intellectual Property as a depreciable asset, whether it is

developed internally or acquired. Include goodwill and trademarks in

these definitions. Adopt international accounting practice and allow IP

amortisation expenses for tax purposes.

These recommendations all focus on the Government need to be

flexible with their approach to addressing barriers to success.

Now is a very good time to look seriously at this reform. We are

taking some positive steps forward and the opportunity to provide a

framework for high value-added products and services is very real.

The recent announcement of the Innovative Manufacturing Cooperative

Research Centre (IM-CRC), coupled with the progress being made

by the Advanced Manufacturing Industry Growth Centre, are both

designed to encourage collaboration and the commercialisation of

new products, improve workforce skills, improve the engagement

with international markets and global supply chains and transform our

existing manufacturing sector into one that the new age will support.

AMTIL is pleased to be involved across a number of these initiatives.

We have recently been re-appointed as an Industry Partner for the

Entrepreneurs’ Programme and will continue the delivery of services

under this Programme through Business Advisors and Research

Connect Facilitators. We are also a Core Participant in the IM-CRC,

providing the role of Portal Organisation that will encourage investment

in research and industry engagement through various activities. We

have also been working closely with the Chairman of the Advanced

Manufacturing Industry Growth Centre, Andrew Stevens, as he works

to establish this new initiative. I look forward to keeping our readers

informed on this very important progress.