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AAP

2013-02-19

High-tech manufacturers are proposing a tax incentive to support export-oriented local production as a "no cost" alternative to industry grants and the federal government's $1 billion innovation package.

The proposal for a manufacturing tax incentive, conceived by the head of a Queensland medical device firm, would give tax relief to manufacturers who develop Australian ideas into successful exports.

Though still in early development, the idea has won the support of Australia's peak biotechnology industry body, AusBiotech.

Barry Thomas, Asia-Pacific director of Brisbane-based Cook Medical, said he thought of the manufacturing tax incentive concept as a way to reverse the flow of high-tech manufacturing away from Australia.

"What we are proposing is, if you take an Australian idea or IP (intellectual property) and manufacture it and sell it to the world, then why not have a manufacturing incentive that attaches to it?" Mr Thomas told AAP.

Mr Thomas said the federal research and development (R&D) tax incentive phased out once a product or IP reached commercialisation, and a lot of Australian IP was sold overseas at that point.

A manufacturing tax incentive could ensure there was a material benefit to Australian industry.

"Rather than direct grants, you have actually got to generate income to get the incentive back," Mr Thomas said.

"As you generate income, there is no net loss to government up front."

Federal Industrial Relations Minister Greg Combet was due to visit Cook Medical on Tuesday and Mr Thomas said his staff may have the opportunity to tell the minister about the proposal.

AusBiotech chief executive Anna Lavelle said while the R&D tax incentive had benefited Australian innovation: "We recognise innovative manufacturers are not enjoying the same support."

"AusBiotech is interested in working ... to design an extension of the incentive that delivers appropriate support to manufacturers working in the innovation space," Dr Lavelle said.

The Gillard government on Sunday unveiled a $1 billion proposal to support local manufacturing by cutting the R&D tax incentive for businesses with an annual turnover above $20 billion to make more resources available to small and medium enterprises.

The plan also encourages local content in major infrastructure projects and creates 10 innovation precincts to connect business and researchers.

Mr Thomas said he was not sure a manufacturing innovation precinct in Victoria would benefit his business in Queensland, and the return on investment from creating them was not clear.

Cook Medical has 400 staff and produces specialised aortic stent grafts for heart conditions, as well as other medical devices, and exports 80 per cent of its product, mostly to Asia.

The company is the Asia-Pacific arm of US-based Cook Medical, which has manufacturing operations in other parts of the world.

Peter Trute, AAP Senior Finance Writer