How can a manufacturing business in Australia hope to grow its market share when competing against cheaper labour and materials in places like China and Bangladesh?
This is a question that stumps politicians and market analysts in their endless ponderings about Australia’s future productivity.
And yet – there are some very successful businesses in Australia, surviving and thriving. What’s their secret?
The answer lies in the trend towards elaborately transformed manufacturing techniques or, more simply, “high-end manufacturing”.
Take Australian steel makers. They have come under huge pressure due to competition with lower-cost manufacturers such as in China. How do they cope? By innovating, that’s how. They develop new and improved grades of steel and innovative end products offering unique applications.
This is where Australian companies have an edge.
Yes, we have high labour costs but we also have a highly educated and skilled population and a strong public research sector that is keen on collaboration and commercialisation.
Through innovation, Australian will continue to have a manufacturing sector providing employment and products for local and international markets.
But what about small, privately owned companies? Research and development is expensive and inherently risky. Can a small company really be expected to be innovative and invest in research and development?
The government says yes – we want you to invest in R&D and you are entitled to a generous tax incentive to explore every opportunity in your business to gain efficiencies, have more product and process lines under development and foster your intellectual property.
And it is particularly favourable to companies with an aggregated turnover of under $20 million.
For every dollar spent on eligible activities, the government pays a 45c tax offset that may be available in cash once your tax liability has been taken into account.
So for companies faced with competitive price pressure, the R&D Tax Incentive can be leveraged to achieve new levels of efficiency in production processes.
It can be applied to experimenting with technical and scientific processes in order to develop new and improved products.
It can help unlock the means of differentiating your products and services in a tightly competitive market.
And it does this by sharing the risk of investment in order to protect the future of your business.
To learn more about the R&D Tax Incentive, subscribe to this blog, download this ebook, join the conversation.