Australia’s innovation minister wants big ideas built here – but please step over the rotting corpse of startups killed by his government’s policies

Federal industry and science minister Tim Ayres wants Australia to build more research-intensive businesses and turn local inventions into jobs.

The minister rocked up to the National Innovation Policy Forum in Canberra on Tuesday, with a “built here” theme, arguing the nation needed stronger institutions to commercialise research and spread new technology through the economy.

His ambition was to “turn more Australian inventions and IP into real businesses and real jobs”.

But his focus appeared skewed to the top end of town, rather than startups to drive this change. Ayres argued large companies lift productivity and help smaller businesses improve. It’s Tim’s trickle down theory.

“Large firms are just 0.2% of Australian businesses, but they produce around 44% of industry value,” he said.

“You lift their productivity and their innovation, and you lift the national number.”

Timmovation knows the best way to scale is, well, already be scaled. And he pressed on with the bigger is better riff: large firms “connect with the smaller firms around them through supply chains. Where they set the standards for quality, delivery, and innovation systems through skilled people who move on and take their knowledge with them.

“Through shared knowledge, joint research, training apprentices, and training graduates – but that’s how diffusion happens.”

Corporate kumbaya

That’s not to dispute that collaboration with corporates can be an important part of success, but often, it occurs at the expense of the incumbents, who often fight tooth and nail to prevent change, drive out usurpers and maintain their monopolies.

Consider the likes of Canva, Atlassian, Afterpay, WiseTech and others who’ve gone from zero to employing thousands in just a few decades. They did it as challenger brands often despite and in spite of large firms.

Tim’s expertise on business collaboration came from his pre-politics experience as a union organiser.

Ayres pointed to a $120 million National Reconstruction Fund loan to Built Living, the Wesfarmers and Built modular housing venture, and a $50 million CRC AI Accelerator due to launch in early 2027 as practical examples of government support.

Technology adoption depended on the “guts and smarts and determination” of people experimenting and solving problems, he said.

But the speech didn’t find room to address a key “innovation” his government is undertaking in tax changes that could reshape the economics of that process.

Tax changes for startups

Labor is midway through broad sweep of reforms to everything from capital gains to research and development tax incentives and even early stage venture funds. They’re clouds over his vision: will founders, employees and investors have the incentives and cash to deliver on his corporate collaboration kumbaya?

To recap: from July next year, the CGT overhaul replaces the current 50% discount with inflation indexation and a minimum 30% tax on real gains arising after that date. It’s meant to address housing affordability, but if there’s one thing the government has a talent for, it’s the unintended consequences of its intentions.

After an outcry and consultation, Treasury has improved the draft legislation, but we’re all currently waiting for the changes 3.0 after the latest round of feedback. Many still have concerns and anecdotally at this point, a move offshore for Australian innovation is already beginning to take shape.

The Tech Council of Australia, an organisation already stacked with the big end of tech town, has warns that the retained $50 million turnover ceiling excludes new investments in successful scaleups, while Australian workforce and asset tests create another tension.

Increase Australian employment but expand faster overseas is just one of the ways a company will be rooted when it comes to favourable treatment here.

And then there’s our national obsession with paperwork. Many, including the TCA, are alarmed that investors and employees could lose concessions because their company pivots or misses reporting obligations, in circumstances outside shareholders’ control.

For a minister who wants more Australian inventions commercialised, making international growth and changes of direction harder to navigate is a proverbial camel through the policy needle’s eye.

Timmovation™

To the crux of Timmovation’s rallying cry, R&D changes are a larger funding problem when they kick off in July 2028.

His innovators face higher offsets for core research, a $200 million expenditure ceiling and a $50m turnover threshold for refundable offsets for eligible businesses. But supporting R&D activities no longer qualify – and as many have warned, they’re the foundations underpinning the higher-end work.

In its Treasury submission, the Tech Council describes an AI company where 70% of eligible research spending covered supporting activities, including engineering, data preparation and testing frameworks.

A higher rebate on the remaining work won’t necessarily compensate for losing eligibility across most of the bill.

The government says its R&D changes will encourage additional investment and improve the scheme’s sustainability. Industry warnings concern the design, rather than proving investment has already disappeared.

Ayres wants Australian ideas to become Australian businesses, then it requires tax settings that support people taking the risks, whether it’s experimentation, overseas expansion and the long wait for commercial success.

And that means the government and minister have to take risks too, rather than acting like mid-level managers telling everyone the beatings will continue unit moral improves.