The States lift innovation spending, program tweaks to EMDG, and the ATO releases ESIC detail.

State innovation grant programs

The Turnbull Innovation agenda may not have attracted populist support at the ballot box but it is driving perhaps the largest blooming of innovation expenditure from State Governments in the last 10 years.

Queensland has revamped its innovation grants under the banner ‘Advance Queensland’, Victoria has launched its version under the ‘Back to Work’ funds and NSW is reviewing its innovation offering under its ‘Jobs for NSW’ program.

These programs support new technologies in key sectors that will deliver future employment growth. Start-up ecosystems and collaboration between industry and research institutions are being supported as well as growth businesses.

The grant universe is as rich as the stars in the night sky. The challenge for businesses is to develop funding strategies for innovation and business growth that contemplate access to grants or concessional loans from Government.

Program tweaks to EMDG

From 1 July 2016, the 3% default claim uplift for communication expenditures for eligible communications expenses can no longer be claimed. Free sample expenses are now capped at $15,000 except for first year claimants where no cap applies. Daily allowance expense – lifted from $300 to $350 per day of eligible activity

Early stage investment companies

In May, the ATO released its explanation of how ESIC rules are to be applied. The 100 point test is clinically objective. The so-called principles test is more subjective and are clearly geared to later stage R&D entities nearing commercialisation and therefore better able to satisfy the principles test.

The principles test seeks clarity on 5 points –

1. The innovation intended for commercialisation
2. The growth potential for the innovation in the market
3. The capability to scale up the innovation
4. The size of the target market (must be broader than a local city, area or region)
5. The nature of the competitive advantage the innovation delivers

What does this mean? The principles are most easily satisfied if the ESIC has a management and governance set-up experienced in and connected to the industry in which they are operating. If this team is in place then they will often be able to demonstrate: a working (patentable) prototype product that has a validated and simple value proposition for its target market, backed by a strong lead user driven sales pipeline, and a sensible operating plan to set up or scale up.