SECTION 2
OUR PROGRAMS
OVERVIEW
Innovation Australia aims to promote the development, and improve the
efficiency and international competitiveness of Australian industry by
encouraging research and development activities, innovation activities and
venture capital activities. Innovation Australia is involved in the administration
of Australian Government programs designed to stimulate investment,
innovation through research and development (R&D) and commercialisation.
These programs are:

R&D Tax Concession

Green Car Innovation Fund (GCIF)

Innovation Investment Fund (IIF)

Innovation Investment Follow-on Fund (IIFF) 1

Commercialisation Australia (CA)

Climate Ready1

Re-tooling for Climate Change

Commercialising Emerging Technologies (COMET)1

Early Stage Venture Capital Limited Partnerships (ESVCLP)

Venture Capital Limited Partnerships (VCLP)

Pharmaceuticals Partnerships Program (P3) 1

Pooled Development Funds (PDFs) 1

Renewable Energy Equity Fund (REEF) 1

Pre-Seed Fund (PSF) 1

(ACIS Stage 2) Motor Vehicle Producer (MVP) R&D Scheme1

Commercial Ready1

Renewable Energy Development Initiative (REDI) 1

Industry Cooperative Innovation Program (ICIP) 1

R&D Start1.
Together these programs form a suite of initiatives designed to encourage
Australian industrial R&D and innovation efforts, to assist in the successful
commercialisation of R&D outcomes.
1
As at 30 June 2010 Innovation Australia monitors ongoing projects in these programs
which are closed to applications.
A committee structure is used to help Innovation Australia administer its
programs.
R&D TAX CONCESSION
ESTABLISHMENT
The R&D Tax Concession was introduced in 1985 to encourage Australian
industry to undertake increased levels of eligible Research & Development
(R&D). It is an entitlement program that assists and encourages business R&D
activities undertaken in Australia.
The program is based on the legislative framework contained in Part IIIA of the
Industry Research and Development Act 1986 (IR&D Act) and sections 73B to
73Z of the Income Tax Assessment Act 1936. In addition, the Income Tax
Assessment Act 1997 is relevant to calculating deductions for plant and other
assets for use in R&D. The R&D Tax Offset and the R&D Incremental (175 per
cent Premium) Tax Concession were introduced following the former Australian
Government’s Backing Australia’s Ability statement in January 2001.
Further changes to the R&D Tax Concession were made in May 2007, including
changes to the beneficial ownership provisions extending access to the 175 per
cent Premium to Australian companies in a multi-national enterprise group who
undertake their R&D in Australia, but hold the intellectual property overseas.
OBJECTIVES
Through the R&D Tax Concession, the Australian Government aims to achieve its
broader objective of developing internationally competitive industries in
Australia by:

encouraging the development by eligible companies of innovative products,
processes and services

increasing investment by eligible companies in defined R&D activities

promoting the technological advancement of eligible companies through a
focus on innovation or high technical risk in defined R&D activities

encouraging the use by eligible companies of strategic R&D planning

creating an environment that is conducive to increased commercialisation of
new processes and product technologies development by eligible companies.
PROGRAM PERFORMANCE AND OUTCOMES IN 2009-10
REGISTRATIONS
Users of the R&D Tax Concession must apply annually to Innovation Australia
(via AusIndustry) for registration of activities undertaken in the previous income
year. Eligible companies may lodge registration applications during the
10 months after the end of their income year, and then claim the tax concession
for R&D in their annual tax returns filed with the Australian Taxation Office
(ATO).
The majority of applications for registration for the R&D Tax Concession are
received around the end of April each year. Data shown in this report on
registrations for the 2008-09 income year as at 30 June 2010 are incomplete;
further applications for the 2008-09 income year will continue to be received up
to 31 October 2010 from companies with non-standard income period balance
dates.
Figure 2.1 Summary of registration data from 1985 to 2008-09, as at 30 June 2010
Figure 2.1 data set
As at 30 June 2010, there were 8,440 companies registered for the 2008-09
income year, with reported R&D expenditure totalling $17.38 billion (Figure
2.1). Continuing the trend of previous years, the number of registrations to date
has achieved another record level, with an increase of 8.8 per cent from the
2007-08 income year. The total reported R&D expenditure also represents a
significant growth from the previous year of 22.5 per cent.
A service delivery performance of 92 per cent of applications registered within
the target of 30 days was achieved during the 2008-09 financial year, and 90 per
cent of electronically submitted applications were registered within the target of
10 days.
Figure 2.2 Registration by R&D expenditure (%) for 2008-09, as at 30 June 2010
Figure 2.2 data set
Note: As at 30 June 2010, 8,440 companies were registered for the 2008-09 financial year, with
reported expenditure of $17.38 billion.
The majority of companies (58 per cent) reported R&D expenditure of less than
$500,000, representing approximately six per cent of total reported R&D
expenditure. R&D activities valued at greater than $10 million were undertaken
by only three per cent of registrants, which represented approximately 61 per
cent of the total reported R&D expenditure.
Figure 2.3 R&D expenditure ($M) by field of research (Australian Standard Research Classification)
for 2008-09, as at 30 June 2010
No of times nominated (a)
Expenditure $M
12000
11000
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
The Arts
Studies In Human Society
Physical Sciences
Medical And Health Sciences
Mathematical Sciences
Law, Justice And Law Enforcement
Language And Culture
Information, Computing And Communication Sciences
History And Archaeology
Engineering And Technology
Education
Economics
Earth Sciences
Commerce, Management, Tourism And Services
Chemical Sciences
Biological Sciences
Behavioural And Cognitive Sciences
Architecture, Urban Environment And Building
Agricultural, Veterinary And Environmental Sciences
0
Figure 2.3 data set
Note: A company’s R&D activities may relate to more than one Australian Standard Research
Classification (ASRC)
PROGRAM ELEMENTS
The R&D Tax Concession allows eligible Australian companies undertaking
defined R&D activities to claim a tax deduction of up to 125 per cent of eligible
R&D expenditure when lodging their annual tax returns. Companies determine
the eligibility of their R&D activities under self-assessment, with compliance
monitored by Innovation Australia.
The R&D Tax Offset is available to eligible Australian companies with an annual
group turnover of less than $5 million and annual group R&D expenditure of up
to $2 million. Smaller companies in tax loss that would otherwise carry forward
R&D related tax losses can realise these losses as a cash equivalent payment
when their tax return for the relevant year is processed. This provides assistance
to these smaller firms at the time they need it most, in their growth stages.
The R&D Incremental (175 per cent Premium) Tax Concession encourages
additional investment in R&D. The 175 per cent Premium is available to eligible
Australian companies on the part of their eligible labour-related R&D
expenditure that is greater than a base level determined by their average R&D
expenditure over the previous three years. Companies must provide evidence of
three prior years of eligible expenditure on R&D. Grouping rules apply, as well as
certain expenditure rules and anti-avoidance mechanisms.
In addition, changes to the beneficial ownership provisions were announced in
May 2007 which provided access to a R&D Incremental (175 per cent
International Premium) Tax Concession to subsidiaries of multi-national
enterprises, effective from 1 July 2007.
Table 2.1: Registrants for 2007-08 and 2008-09 as at 30 June 2010 (a)
2007-08
Registrants, as at 30 June 2010
2008-09
Number of Reported R&D Number of Reported R&D
Companies Expenditure Companies Expenditure
($M)
($M)
7,899
14,916.04
8,440
17,379.26
Total registrants
125% R&D Tax Concession
3,060
4,737.82
3,252
5,079.10
R&D Tax Offset
(A)
2,738
844.41
2,880
928.94
175% Premium
(B)
1,505
8,972.61
1,608
10,302.46
International Premium
(C)
13
35.49
48
499.35
Tax Offset and 175% Premium
(D)
571
276.03
630
320.88
Tax Offset and Internat. Premium
(E)
3
1.87
4
1.30
175% Premium and Internat. Premium
(F)
8
47.17
18
247.23
175% Premium and Tax Offset and
Internat. Premium
(G)
1
0.60
0
0.00
Total Tax Offset *
3,313
1,122.91
3,514
1,251.12
Total 175% Premium **
2,085
9,248.64
2,256
10,870.57
25
85.20
70
747.88
Total International Premium ***
a
This table uses Innovation Australia registration data and indicates the declared intention
of registrants to claim under each element. Actual benefits will vary depending on
individual circumstances.
*
Total registrants for the R&D Tax Offset is (A+D+E+G).
**
Total registrants for the 175% Premium is (B+D+F+G).
***
Total registrants for the International Premium is (C+E+F+G).
Table 2.1 and Figures 2.4 and 2.5 illustrate the number of companies registered
for the R&D Tax Concession and their reported R&D expenditures for 2007-08
and 2008-09.
The total number of companies registered to date for the 2008-09 income year
has increased by seven per cent to a new record number of 8,440. Of these, a
total of 2,880 companies (34 per cent) intended to claim only the R&D Tax Offset
and 1,608 companies (19 per cent) intend to claim only the 175 per cent
Premium, while 630 companies intended to claim both the R&D Tax Offset and
the 175 per cent Premium. In addition, a total of 70 companies indicated an
intention to claim the International Premium R&D Tax Concession.
The number of registrants intending to claim the tax concession for R&D as the
R&D Tax Offset in the 2008-09 income year has also increased by approximately
five per cent, compared with the 2007-08 income year.
Similarly, the number of companies intending to claim the 175 per cent Premium
in the 2008-09 income year has increased by seven per cent, with a
corresponding 15 per cent increase in the reported R&D expenditure to
$10,302.46 million (equivalent to 59 per cent of total reported R&D
expenditure), compared with $8,972.6 million (60 per cent of total R&D
expenditure) for the 2007-08 income year.
Figures 2.4 and 2.5 present the number of registrations for 2008-09 by R&D
expenditure and turnover respectively.
Figure 2.4 Number of registrations by R&D expenditure and element for 2008 09, as at 30 June
2010
R&D Tax Offset
125% R&D Tax Concession
Tax Offset & 175% Premium
Incremental Tax Concession (175% Premium)
Tax Offset with International Premium
International Premium
175% Premium with International Premium
5000
3000
2000
1000
Figure 2.4 data set
>$50M
>$25M <=$50M
Expenditure Range
>$10M <=$25M
>$5M <=$10M
>$1M <=$5M
>$0.5M <=$1M
0
<=$500K
Number of Registered Companies
4000
Figure 2.5 Number of registrations by turnover range and element for 2008-09, as at 30 June 2010
R&D Tax Offset
125% R&D Tax Concession
Tax Offset & 175% Premium
Incremental Tax Concession (175% Premium)
Tax Offset with International Premium
International Premium
175% Premium with International Premium
3000
2000
1500
1000
500
>$50M
>$25M <=$50M
>$10M <=$25M
>$5M <=$10M
>$1M <=$5M
>$0.5M <=$1M
0
<=$500K
Number of Registered Companies
2500
Turnover Range
Figure 2.5 data set
Companies reporting a turnover of less than $5 million per annum represented
the largest single group of registrants (64 per cent) for the R&D Tax Concession
in the 2008-09 income year. The number of large companies with turnovers of
more than $50 million per annum represented 12 per cent of registrants.
Table 1.2: New registrants as at 30 June 2010 a
2007-08
New Registrantsb, as at 30 June 2010
Total new registrants
125% R&D Tax Concession
2008-09
Number of Reported R&D
Companies Expenditure
($M)
1855
1,128.60
Number of
Companies
1854
Reported R&D
Expenditure
($M)
1,385.65
799
691.95
800
671.62
R&D Tax Offset
(A)
939
261.79
874
262.08
175% Premium
(B)
88
153.23
126
148.57
International Premium
(C)
0
0
0
0
Tax Offset and 175% Premium
(D)
21
8.59
25
8.53
Tax Offset and Internat. Premium
(E)
0
0
4
1.20
175% Premium and Internat. Premium
(F)
0
0
0
0
175% Premium and Tax Offset and
Internat. Premium
Total Tax Offset *
(G)
0
0
0
0
960
270.38
899
270.61
109
161.82
151
157.13
0
0.00
4
1.20
Total 175% Premium **
Total International Premium ***
a
This table uses Innovation Australia registration data and indicates the declared intention
of registrants to claim under each element. Actual benefits will vary depending on
individual circumstances.
*
Total registrants for the R&D Tax Offset is (A+D+E+G).
**
Total registrants for the 175% Premium is (B+D+F+G).
***
Total registrants for the International Premium is (C+E+F+G).
b
A ‘new registrant’ is a company registered for the R&D Tax Concession for the first time in
a given Income year. A ‘new registrant’ may be a member of a company group, other
members of which may have registered for and claimed the R&D Tax Concession.
Table 2.2 indicates the number of new registrants in the R&D Tax Concession in
the 2008-09 income year is consistent with the previous year. However, the
reported expenditure has increased 23 per cent compared with the previous
year.
TAKE UP OF THE R&D TAX OFFSET AND 175 PER CENT
PREMIUM ELEMENTS
The R&D Tax Offset and the 175 per cent Premium have been in operation since
the 2001-02 income year.
For the most recent complete income year (2007-08), as at 30 June 2010, a total
of 3,309 companies indicated their intention to claim the R&D Tax Offset
(including 571 companies intending to claim both the R&D Tax Offset and the
175 per cent Premium). This represents 42 per cent of total registrants, and
approximately eight per cent of total R&D reported expenditure, which is
comparable with the equivalent figures for the 2006-07 income year (41 per cent
of registrants and seven per cent of R&D expenditure).
For the 175 per cent Premium, 1,505 companies indicated an intention to claim
this element for the 2007-08 income year (including 571 companies intending to
claim both the R&D Offset and the 175 per cent Premium). This corresponds to
26 per cent of total registrants and 62 per cent of total R&D expenditure, which
represents a minor increase on the equivalent figures for the previous income
year (22 per cent of registrants and 59 per cent of reported R&D expenditure).
REGISTERED RESEARCH AGENCIES
The Government’s commitment to encouraging R&D is complemented by
facilitating access by small and medium sized companies to R&D expertise
through the services provided by Registered Research Agencies (RRA).
RRA registration allows companies which would be unable to claim the tax
concession for R&D, if their R&D expenditure has not reached the minimum
threshold ($20,000), to benefit from the concession by contracting their R&D
work to an organisation with RRA status. This enables companies to access
expertise in Australia’s public and private sector R&D organisations, reducing
unnecessary duplication of R&D facilities and improving the overall effectiveness
of Australia’s R&D effort.
As at 30 June 2010, 172 organisations were registered as RRAs.
R&D SYNDICATION
The joint registration (syndication) component of the R&D Tax Concession
(section 39P of the IR&D Act) was introduced on 20 November 1987.
Registration of new syndicates was terminated on 23 July 1996. Of the original
245 registered syndicates, two remain to be formally wound up.
GOVERNANCE OF THE R&D TAX CONCESSION PROGRAM
The R&D Tax Concession is administered jointly by Innovation Australia, through
AusIndustry, and the Australian Taxation Office (ATO).
The Tax Concession Committee (TCC) administers the R&D Tax Concession
under delegation from Innovation Australia.
The role of the TCC is outlined in Section 3 - Corporate Governance.
LIAISON WITH THE AUSTRALIAN TAXATION OFFICE
AusIndustry and the ATO continued to maintain a high level of formal and
informal interaction throughout the year. Strategies to improve the joint
administration of the R&D Tax Concession and safeguard its integrity continued
to be developed through day-to-day contact between the two agencies, and
through formal liaison meetings.
Issues considered at these meetings included:

sharing of operational status information by each agency

ongoing development and implementation of the joint risk management
strategy

updating of customer information, including the Guide to the
R&D Tax Concession

developing a program of joint information presentations in capital and
regional cities.
PROGRAM MONITORING AND ASSESSMENT
Innovation Australia actively monitors the R&D Tax Concession on a risk
management basis. In the last quarter of 2009-10 AusIndustry implemented a
revised Compliance Management Framework for the R&D Tax Concession.
All annual registrations are assessed against the program’s risk selection
framework, which is aimed at identifying eligibility risks as early as possible.
Compliance findings continue to show that the majority of companies represent a
low risk in respect to their R&D eligibility. However, the risk assessment
activities may lead to formal determinations of R&D eligibility, which may in turn
result in denial of the tax concession deductions for R&D.
Through AusIndustry’s national customer service network a range of program
advice activities, educational seminars and risk assessment monitoring continues
to be provided.
CUSTOMER FEEDBACK AND LIAISON
The R&D Tax Concession Administration Consultative Group was established
during 2001-02 to facilitate direct interaction between R&D Tax Concession
customers and practitioners and AusIndustry and the ATO as joint managers of
the program.
The Consultative Group meets in various State capitals during the year and is
chaired by Innovation Australia’s Tax Concession Committee Chair, who reports
to the TCC and Innovation Australia. The Group’s major role is to provide
customer feedback and advice on operational and administrative issues, such as
registration of R&D activities and introduction of new forms and guidelines, in
order to improve the delivery of the R&D Tax Concession.
Meetings of the Consultative Group were held in Sydney and Melbourne in
March 2010 and the TCC Chair presided over those meetings.
Topics discussed at these meetings included:

development of new online registration application procedures and forms

recent ATO interpretative decisions and legislative changes

general compliance issues

the proposed introduction of the R&D Tax Incentive.
R&D TAX CONCESSION CASE STUDIES
TAX CONCESSION INVESTED IN GREEN TECHNOLOGY
In the past year alone, EP&T Global has saved its customers more than $14
million in electricity, gas and water costs, according to the company’s founder
and CEO Keith Gunaratne.
“At the same time, we also reduced our customers’ greenhouse gas emissions by
more than 80,000 tonnes and saved 650 million litres of water,” Keith said.
EP&T Global is an energy conservation and environmental solutions leader. It
has developed unique technologies and services that building and shopping
centre owners can use to dynamically monitor and report on the electricity, gas
and water they consume, and the amount of waste they create.
According to Keith, it is the way that this information is used that allows owners
to operate their buildings more efficiently.
“By monitoring a building intelligently with accurate technology, property
owners can identify wastage and therefore identify opportunities to save
money.”
Keith said the Australian Government’s R&D Tax Concession had helped the
company grow since it opened for business in 1993.
“When we started out it was just two people, and receiving the concession
helped us employ a third and then a fourth person.”
The company, based in Sydney, now employs 40 engineers and counts
companies in the United Kingdom and Dubai among its customers.
“Every dollar in the concession is very valuable when you’re small,” Keith said.
“The concession is fantastic; it’s practical and easy to manage. There’s hardly any
red tape and that means it’s not costly to administer.”
Technologies developed by EP&T with the help of the R&D Tax Concession have
assisted two Australian commercial property companies achieve the world’s no.
1 position in the Dow Jones Sustainability World index in 2007 & 2009.
RESEARCH HELPS TRANSFORM THE “HUMBLE” CONCRETE
BLOCK
Building without mortar is a new concept in building developed by Gold Coast
company Formblock.
“Our blocks use an interlocking plastic bridge to lock them in place instead of
mortar,” said Formblock’s Managing Director George Ryder.
“Our new system means block-layers can throw away their traditional tools –
their trowel, cement mixer and hose and increase their turnover, profit and
productivity.
“It’s been 60 years and the humble concrete block hasn’t changed.”
George said the system started as a new way to build masonry walls, but was fast
becoming the answer to building large-scale commercial projects, mass housing,
remote housing and also rebuilding after disasters.
George said that building in remote areas was one of the most exciting uses of his
technology.
“If a tsunami or an earthquake hits, we will be able to use local materials and
transform them into buildings.”
George said his results showed Formblock was cutting construction costs and
times by more than 20 per cent.
“I doubt that we would have done this without the R&D Tax Concession. I don’t
think we would have dedicated the resources.”
George said he had spent the last 20 years “researching and perfecting” the
blocks.
“It’s been a gradual process – I have more than 50 patents to my name and with
the Australian Government’s continued support, we have several new products
that we will be able to design and commercialise.”
RESEARCH
SUCCESS
STEERS
AGRICULTURAL
INNOVATOR
TO
With a heavy focus on research and development, GPS-Ag has developed a range
of products for the farming industry. They include automatic steer systems for
farm vehicles, to systems which talk to any implements attached, and devices
which allow for perfect planting.
As with many new companies, the first few years at GPS-Ag meant a lean
operation, starting with only five staff. Ten years on and the systems have been
adopted by farmers in Australia and around the world resulting in an increase in
staff to 54, with 26 staff dedicated to field work.
Being eligible for the R&D Tax Concession means the company can continue to
come up with “revolutionary ways to solve problems”.
According to GPS-Ag’s sales and marketing manager Adam Hutton, receiving the
tax concession means the company can keep reviewing modern farming
practices and develop innovations.
“This gives us an advantage over competitors,” Adam said.
One of the more recent developments is GPS-Ag’s weed identification system,
WEEDit.
WEEDit can travel at speeds of up to 25km/h and targets the chemical directly
onto the weed instead of the entire field.
Adam said some customers were reporting that they were saving up to 90 per
cent in chemicals.
“The efficiencies that our products bring generally pay for the system within
three to four years.”
TRANSPORT INNOVATIONS KEEP ON TRUCKIN’
Imagine bringing up a three-dimensional picture of a normal, everyday truck on
your computer – and then stretching it to its limits.
Kevin McDonnell, engineering manager with J Smith & Sons said that the
company’s engineers used a set of formulas, and several software packages, to
optimise – or stretch – each design.
“We’ve created a niche market for ourselves – designing mining trucks and
trailers which are only rated for the private roads on mining sites,” Kevin said.
“The vehicles can be wider, larger and higher to suit the mine site’s
specifications.”
J Smith & Sons produces vehicles such as specialist trailers for the coal, sugar
cane and loose rock industries. The company relies on the Australian
Government’s R&D Tax Concession to help drive its research program.
With its team of six engineers, J Smith & Sons put 6000 engineering hours into
developing one of its signature products – a “flatpack” car carrier. The car carrier
flattens down to 1.5 metres high.
“We’ve invented a system so that the operator only needs to drive cars onto the
bottom layer,” Kevin said.
“Then if a car is going to be transported on the top layer of the car carrier, the
operator stands on the ground with a remote, and hydraulics lift the car and its
deck to the second level.”
Kevin said the problem with the previously-designed car carriers was
occupational health and safety issues.
“The flatpack has been designed to provide a much safer operating environment
and to reduce damage to cars during loading and unloading.”
APPENDIX CHART DATASETS
FIGURE 2.1 DATA SET
Figure 2.1 shows the number of companies registering for the R&D Tax
Concession and the reported expenditure in millions, each year from 1985-86 to
2008-09, as at 30 June 2010.
Registration Year
Number of Companies
1985/86
1986/87
1987/88
1988/89
1989/90
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
Total
2,549
1,666
2,067
2,153
2,365
2,499
2,836
2,960
3,436
3,624
3,734
3,295
3,304
3,185
3,274
3,732
4,755
5,097
5,645
5,994
6,418
6,963
7,898
8,440
99
1
97,989
Reported Expenditure
$M
108
731
1,093
1,322
1,625
2,190
2,698
2,973
3,392
3,958
4,470
4,174
4,353
5,094
4,920
5,670
6,092
6,363
6,923
8,271
9,745
12,387
14,916
17,379
616
1
131,467
FIGURE 2.2 DATA SET
Shows the percentage of registrants under the R&D Tax Concession within
each R&D expenditure level (as reported by registrants). Fifty-eight per
cent of registrants reported expenditure less than or equal to $500,000.
Program
Elements
Expenditure
Range
>=0$M
<=0.5$M
>0.5$M
<=1$M
>1$M
<=5$M
>5$M
<=10$M
>10$M
>25$M
<=50$M
>50$M
Total
125%
R&D
Tax
Conces
sion
175%
Premium
with
Internatio
nal
Premium
Incrementa
l Tax
Concession
(175%
Premium)
Internati
onal
Premiu
m
R&D
Tax
Offset
Tax
Offset &
175%
Premiu
m
Total
355
Tax
Offset
with
Internati
onal
Premiu
m
3
1857
6
433
8
2213
581
2
282
3
660
265
1
1794
653
5
583
17
7
9
0
1274
82
1
127
8
0
1
0
219
50
19
2
0
105
42
8
3
0
0
0
0
0
0
278
9
3251
2
18
37
1609
1
48
0
2880
0
630
0
4
Return to document
FIGURE 2.3 DATA SET
Research conducted by users of the R&D Tax Concession for the 2008-09
year, as measured by reported R&D expenditure against Australian Standard
Research Classification (ASRC), shows the top three areas are Engineering
and Technology; Information, Computing and Communication Sciences; and
Medical and Health Sciences.
4875
8440
ASRC Group
125%
R&D Tax
Concessi
on: No of
times
category
nominat
ed
125%
R&D Tax
Concessi
on:
Expendit
ure $M
175%
Premium
with
Internati
onal
Premium
:No of
times
category
nominat
ed
175%
Premium
with
Internati
onal
Premium
:
Expendit
ure $M
Increme
ntal Tax
Concessi
on
(175%
Premium
): No of
times
category
nominat
ed
Increme
ntal Tax
Concessi
on
(175%
Premium
):
Expendit
ure $M
Internati
onal
Premium
: No of
times
category
nominat
ed
Intern
ational
Premiu
m:
Expen
diture
$M
R&D
Tax
Offset:
No of
times
catego
ry
nomin
ated
R&D Tax
Offset:
Expendit
ure $M
Tax
Offset &
175%
Premium
: No of
times
category
nominat
ed
Tax
Offset
&
175%
Premiu
m:
Expen
diture
$M
Tax
Offset
with
Intern
ational
Premiu
m: No
of
times
catego
ry
nomin
ated
Tax
Offset
with
Intern
ational
Premiu
m:
Expen
diture
$M
Total:
No of
times
nomin
ated
(a)
Total:
Expendit
ure $M
Agricultural, Veterinary
And Environmental
Sciences
Architecture, Urban
Environment And
Building
248
224.2
1
2.8
131
226.3
2
18
180
58.7
42
18.1
0
0
604
548.10
81
195.4
0
0
18
249.9
0
0
46
12.4
2
0.8
0
0
147
458.50
Behavioural And
Cognitive Sciences
3
1.4
0
1
0.1
0
0
3
0.8
2
0.2
0
0
9
2.40
Biological Sciences
49
42.4
1
0.9
41
75.9
1
11.5
70
26.2
16
7.8
0
178
164.70
Chemical Sciences
121
69.1
1
0.1
61
81.9
0
80
23.6
22
7.6
1
0.1
286
182.40
Commerce,
Management, Tourism
And Services
52
61.7
0
0
12
54.7
1
3.6
45
11.2
10
2.6
0
0
120
133.90
Earth Sciences
56
54.3
1
0.3
35
30.6
0
0
68
29.5
6
2
0
0
166
116.80
Economics
2
1.4
0
0
0
0
0
0
0
0
0
0
0
2
1.40
Education
4
3
0
0
1
0
0
0
15
3.3
2
0.4
0
0
22
6.70
Engineering And
Technology
1921
3,323.90
14
230.5
1008
6,969.90
16
315.3
1254
371.6
266
124.5
1
0.1
4480
11335.8
0
History And
Archaeology
1
0.3
0
0
0
0
0
0
0
0
0
0
0
0
1
0.30
Information,
Computing And
Communication
Sciences
810
905.4
2
11.5
408
2,221.40
16
75.9
1004
337.2
267
139.3
1
0.8
2508
3691.60
Language And Culture
0
0
0
0
1
0.2
0
0
0
0
0
0
0
0
1
0.20
ASRC Group
125%
R&D Tax
Concessi
on: No of
times
category
nominat
ed
125%
R&D Tax
Concessi
on:
Expendit
ure $M
175%
Premium
with
Internati
onal
Premium
:No of
times
category
nominat
ed
175%
Premium
with
Internati
onal
Premium
:
Expendit
ure $M
Increme
ntal Tax
Concessi
on
(175%
Premium
): No of
times
category
nominat
ed
Increme
ntal Tax
Concessi
on
(175%
Premium
):
Expendit
ure $M
Internati
onal
Premium
: No of
times
category
nominat
ed
Intern
ational
Premiu
m:
Expen
diture
$M
R&D
Tax
Offset:
No of
times
catego
ry
nomin
ated
R&D Tax
Offset:
Expendit
ure $M
Tax
Offset &
175%
Premium
: No of
times
category
nominat
ed
Tax
Offset
&
175%
Premiu
m:
Expen
diture
$M
Tax
Offset
with
Intern
ational
Premiu
m: No
of
times
catego
ry
nomin
ated
Tax
Offset
with
Intern
ational
Premiu
m:
Expen
diture
$M
Total:
No of
times
nomin
ated
(a)
Total:
Expendit
ure $M
Law, Justice And Law
Enforcement
1
0
0
0
0
0
0
0
2
0.2
0
0
0
0
3
0.20
Mathematical Sciences
8
2.8
0
0
13
8.1
0
0
7
1.7
1
0.9
0
0
29
13.40
Medical And Health
Sciences
127
181.5
1
1
62
364.3
12
75
155
43.7
29
15.5
1
0.4
387
681.40
Physical Sciences
11
1.7
1
0
5
6.1
0
0
13
4
4
0.5
0
0
34
12.30
Studies In Human
Society
0
0
0
0
0
0
0
0
3
0.3
0
0
0
0
3
0.30
The Arts
6
5.7
0
0
1
3.3
0
0
5
1.1
0
0
0
0
12
10.10
Total
3501
5,074.40
22
247.2
1798
10,292.5
0
48
499.4
2950
925.6
669
320
4
1.3
8992
17360.3
0
Return to document
FIGURE 2.4 DATA SET
Gives a breakdown of the number of companies registering for each element of the R&D Tax Concession and the levels of expenditure.
Expenditure
Range
125%
R&D
Tax
Conces
sion
>=0$M <=0.5$M 1857
>0.5$M <=1$M
581
>1$M <=5$M
653
>5$M <=10$M
82
>10$M <=25$M 50
>25$M <=50$M 19
>50$M
9
Total
3252
Return to document
175%
Premium with
International
Premium
Incremental
Tax
Concession
(175%
Premium)
International
Premium
R&D
Tax
Offset
Tax
Offset &
175%
Premium
Tax Offset
with
International
Premium
Total
6
2
5
1
2
0
2
18
432
282
583
127
105
42
37
1608
8
3
17
8
8
3
1
48
2213
660
7
0
0
0
0
2880
355
265
9
1
0
0
0
630
3
1
0
0
0
0
0
4
4874
1794
1274
219
165
64
49
8440
FIGURE 2.5 DATA SET
Shows the number of registered companies in each turnover range in 2008-09 and within this data set, the number of
registrations sought for each element of the R&D Tax Concession.
Expenditure
Range
175%
International Tax Offset
Premium
Premium
with
with
International
International
Premium
Premium
>=0$M
2
<=0.5$M
>0.5$M
1
<=1$M
>1$M <=5$M
1
>5$M <=10$M 0
>10$M
1
<=25$M
>25$M
1
<=50$M
>50$M
11
Total
17
Return to document
Incremental
Tax
Concession
(175%
Premium)
Tax
125% R&D R&D
Offset & Tax
Tax
175%
Concession Offset
Premium
Total
2
2
140
260
523
1730
2659
1
0
56
113
217
414
802
4
7
3
2
0
0
226
194
223
248
4
0
749
396
426
712
9
6
1942
610
659
6
0
186
0
281
2
476
24
47
0
4
572
1597
3
628
645
3237
3
2876
1258
8406
GREEN CAR INNOVATION FUND
ESTABLISHMENT
The Green Car Innovation Fund (GCIF) program is a key element of A New Car Plan for a
Greener Future announced by the Australian Government in November 2008. The GCIF
opened publicly for applications on 24 April 2009. The GCIF is a competitive grants
program and as at 30 June 2010 would provide $1.1 billion over ten years to Australian
companies.
OBJECTIVES
The policy objective of the GCIF program is to enhance research and development and the
commercialisation of Australian technologies that significantly reduce fuel consumption
and/or greenhouse gas emissions of passenger motor vehicles.
In May 2010, the Australian Government reduced total GCIF funding by $200 million – from
$1.3 billion to $1.1 billion. This decision resulted in a reduction of $50 million in 2011-12,
$75 million in 2012-13 and $75 million in 2013-14.
Table 2.3: Australian Government budget and expenditure at 30 June 2010
Budget
Commitments
Payments made
2009-10
2010-11
2011-12
2012-13
($m)
($m)
($m)
($m)
108.06
103.49
172.50
156.04
0.00
75.63
45.51
0.67
108.06
0.00
0.00
0.00
PROGRAM PERFORMANCE
The GCIF has achieved high levels of awareness within the automotive sector. Nonetheless,
the first full year of the GCIF’s operation during 2009-10 coincided with the latter part of
the global financial crisis. The crisis had a significant adverse impact on the Australian
automotive industry which, in turn, appeared to be a factor in the lower-than-anticipated
initial rate of applications submitted under the GCIF. The number of inquiries and
applications began to increase as the financial year progressed.
In 2009-10, the program received 11 applications seeking grants for a diverse range of
projects. The Green Car Innovation Committee met five times and held three
teleconferences. There were 11 project applications considered by the Committee, two of
which were reconsiderations. Three applications were supported with a further project
offered a grant which was subsequently declined.
On 24 July 2009, the Minister announced a $42 million grant to Ford Australia for the
engineering and fitment of the EcoBoost, a fuel-efficient turbo-charged, four cylinder
motor, to the Falcon as part of Ford’s $230 million Sustainability Initiative. On 11 March
2010, the Minister announced a grant to Orbital Australia of $440,413 to develop directinjection technology in a joint project with Chinese automaker Changan. Orbital will test its
Flex DI technology in a Changan concept engine and vehicles to meet Chinese 2012-14 and
Euro IV emissions and performance targets. A grant agreement was executed with SMR
Automotive Australia Pty Ltd for $2,422,190 to develop a lightweight automotive rear-view
mirror for the global automotive market. Century Yuasa was awarded a grant of $996,327
to design a more efficient automotive battery. All projects supported will contribute to
meeting the program objective of cutting fuel use and reducing carbon emissions.
Table 2.4 GCIF applications considered during 2009-10
Grant Type
Applications
considered (no.)
Applications
approved (no.)
Applications
approved ($m)
Stream A
0
0
0.00
Stream B
11
3
3.86
TOTAL
11
3
3.86
OUTCOMES
The GCIF program has been open publicly for applications for 14 months. Most projects
funded under the program so far are yet to reach completion. As a result, it is too early in
the implementation of most projects to cite final outcomes. Nonetheless, in February 2010,
and assisted by a grant of $35 million from the GCIF, Toyota launched the Australian-made
hybrid Camry on the local market. The car consumes 6.0 litres of petrol per 100 kilometres
and emits 142 grams of carbon dioxide per kilometre – equivalent to a much smaller class
of vehicle. (Source: Green Vehicle Guide).
SUPPORT PROVIDED TO CUSTOMERS
The GCIF program provides funding to Australian companies and is accessible via two
streams:
Stream A provides grants from $5 million for Motor Vehicle Producers (MVPs) registered
under the Automotive Competitiveness and Investment Scheme or the Automotive
Transformation Scheme.
Stream B provides grants from $100,000 for non-tax exempt companies other than MVPs.
Non-tax exempt companies, or an individual or other entity type who warrants to form
such a company before signing an agreement, are eligible to apply.
Grants are provided at a ratio of one dollar of government funding for every three dollars
of eligible expenditure contributed by the grantee (25 per cent), unless agreed otherwise
by the Program Delegate on an exceptions basis. The GCIF supports research and
development, proof-of-concept, early-stage commercialisation and pre-production
development activities that are carried out in Australia. GCIF projects are funded to a
maximum of three years duration with the provision to extend for a further 12 months,
subject to Program Delegate approval.
GOVERNANCE
The Minister issued the GCIF Guidelines on 24 April 2009. The policies and procedures of
the GCIF are set out in the Guidelines and GCIF Directions, which were also issued on
24 April 2009 in accordance with subsections 18A, 19 and 20(1) of the Industry Research
and Development Act 1986.
Innovation Australia, through its Green Car Innovation Committee, considers eligible
applications for both Stream A and B of the GCIF, and provides technical assessments and
merit ranking of eligible applications. The role of the Green Car Innovation Committee is
outlined in Section 3 - Corporate Governance.
Applications for $5 million and above are subject to assessment by the Board.
Stream A applications for grants of $5 million or more that are recommended for support
and are to receive financial assistance of greater than 25 per cent of eligible expenditure,
will be referred to the Minister for consideration. Applications for grants of $10 million or
more that are recommended for funding will be referred to the Cabinet of the Australian
Government for consideration.
GREEN CAR INNOVATION FUND CASE STUDY
GRANT HELPS ORBITAL REV UP LOW-EMISSION ENGINE PROJECT
A Green Car Innovation Fund grant of $440,413 allowed Perth design and manufacturing
firm Orbital Australia to tap into China’s massive car market with its low-emission engine
technology.
The grant meant Orbital could focus on the passenger-car market and develop an engine to
comply with new stringent Chinese fuel consumption laws for new vehicles.
The new legislation comes into effect in China in 2012.
Orbital is working with Chinese car manufacturer Changan Automobile to develop a fourcylinder automotive petrol engine. Changan is China’s fourth largest automaker and aims to
sell about 2.2 million cars in 2010.
Australians bought about one million new vehicles in 2009. The Chinese are buying about
1.2 million vehicles every month.
Orbital has developed low-emission engines, fuelled by small drops of vaporised fuel. The
engines use Orbital’s patented air-assisted direct injection technology.
The key to Orbital’s engine system is that fuel is injected directly into the cylinder, only
putting in as much fuel as needed.
Unlike other direct injection systems, which rely on a high pressure pump, the Orbital
system delivers the fuel in smaller drops using a small quantity of compressed air - much
like an aerosol.
The Green Car Innovation Fund offers grants from $100,000 for projects that significantly
reduce the fuel consumption and/or greenhouse gas emissions of passenger motor
vehicles.
INNOVATION INVESTMENT FUND PROGRAM
ESTABLISHMENT
The Innovation Investment Fund (IIF) program was established in 1997 to promote the
development of an Australian venture capital market for early-stage, technology-based
companies that are commercialising research and development (R&D).
The Australian Government, in partnership with the private sector, established venture
capital funds (IIF funds) to invest in promising early-stage, technology-based companies
commercialising research. By demonstrating the returns achievable from investing in such
companies, the IIF program aims to encourage the private sector to take a more active role
supporting Australian companies to commercialise research.
There have been three rounds of the IIF program. Five funds were established in 1998
under Round 1, four funds in 2001 under Round 2 and as at 30 June 2010 four funds have
been established under Round 3.
The Australian Government has committed $220.7 million for Rounds 1 and 2 of the
program. Private sector funding brings the total funding for the two Rounds to $354.0
million. The Australian Government has committed $200 million for Round 3 of the IIF
program.
Under IIF Round 3, up to 10 funds will be established with each fund comprising
$20 million of government capital matched on at least a 1:1 basis with private sector
capital. It is planned to establish an additional six funds under Round 3 over the next two to
three years. Funds are licensed for a period of 10 years with an additional three years for
the orderly divestments of companies.
IIF funds are managed by private sector fund managers awarded licences through a
competitive selection processes based on merit criteria including expertise and capacity to
manage venture capital investments and ability to raise private sector capital. The selection
process is conducted by the Venture Capital Committee (VCC), an independent expert
panel established under Innovation Australia.
Fund managers are responsible for all investment decisions which are made on a
commercial basis in accordance with the Fund’s investment practices, subject to the IIF
Ministerial Guidelines.
OBJECTIVES
The objectives of Round 3 of the IIF program are:

to develop fund managers with experience in the early stage venture capital industry

by addressing capital and management constraints, to encourage the development of
new companies which are commercialising research and development

to establish in the medium term a "revolving" or self funding scheme

to develop a self-sustaining Australian early stage, venture capital market.
Note: The program objectives for Round 3 differ from the previous two rounds in that the reference to
technology-based companies present in the Rounds 1 and 2 Guidelines has been removed.
Table 2.5 IIF Australian Government budget and expenditure at 30 June 2010
Budget
Commitments
2009-10
2010-11
2011-12
2012-13
($m)
($m)
($m)
($m)
57.34a
23.38
30.95
32.26
15.49
14.73
15.95
9.53
2009-10
2010-11
2011-12
2012-13
($m)
($m)
($m)
($m)
6.98 b
0.00
0.00
0.00
Payments made
a
Includes Revolving Fund proceeds of $32.87 million.
b
The ‘Payments made’ figure includes management fees and recoverable expenses of $3.04 million.
Table 2.6 IIF investments made in 2009-10 (Australian Government contribution)
Fund manager
Investment
($m)
Number of
investee
companies
Allen & Buckeridge Investment Management Pty Ltda
0.00
0
AMWIN Management Pty Ltda
0.00
0
Brandon Bioscience Fund No. 1 Management Partnership LP
1.68
4
Cleantech Australia Fund Management Partnership, LP
1.33
2
Coates Myer and Company Pty Ltd
0.00
0
Momentum Funds Management Pty Ltda
0.00
0
GBS Venture Partners Limiteda
0.00
0
Start-Up Australia Ventures Pty Ltd
0.00
0
Four Hats Capital Pty Ltd (formerly Kestrel Capital)
0.59
2
One Ventures Pty Ltd
0.00
0
Neo Technology Ventures Pty Ltd
0.29
1
Yuuwa Management LP
0.05
1
Stone Ridge Ventures Pty Ltd (formerly Foundation)
0.00
0
Total
3.94
10
a
Funds fully drawn, no further capital available
PROGRAM PERFORMANCE
Innovation Australia (the Board) oversees the operation of the IIF fund managers through
its Venture Capital Committee. The licensed fund managers report six monthly to the Board
on their operations, including the current valuation of investments. Fund managers
reported varying performances during 2009-10.
As at 30 June 2010, the number of investee companies (not including co-investments) for
all IIF fund managers increased to 91, and the amount invested since the inception of the
program was $287.54 million, of which the Australian Government provided
$176.02 million. In 2009-10, $8.38 million was drawn down for investment into
10 companies, of which $3.94 million was drawn down from the Australian Government.
Three of the 10 companies were new investments in 2009-10.
In 2009-10, the Australian Government received collective returns of $2.59 million from
fund managers Coates Myer and Company Pty Ltd, Stone Ridge Ventures Pty Ltd (formerly
Foundation Management Pty Ltd), Four Hats Capital Pty Ltd (formerly Kestrel Capital),
Allen & Buckeridge Pty Ltd, AMWIN Management Pty Ltd, Start-Up Australia Ventures Pty
Ltd, GBS Venture Partners Limited and Neo Technology Ventures Pty Ltd. As at
30 June 2010, this brings total returns to $420.43 million, of which the Australian
Government has received $132.78 million. Of this, $99.93 million has been added to the
revolving fund in line with program objectives of which $64.41 million has been allocated
to the Innovation Investment Follow-on Fund program.
OUTCOMES
The IIF program has contributed to the commercialisation of Australian R&D, with several
investee companies having brought new products to market.
Six of the 13 IIF fund managers have raised subsequent funds, contributing to the
development of the venture capital industry. Most of these funds invest in a broader range
of investments than their predecessor IIF funds.
During 2009-10, five investee companies were fully divested and 10 were partially
divested.
As at 30 June 2010, the portfolio of investments (comprising the value of unrealised
investments and returns since the inception of the funds) was valued at $537.51 million.
After deducting the drawn down capital of $374.83 million, which includes management
fees, the potential net gain for the portfolio is $162.68 million. It is important to note that
valuations of early-stage companies are highly volatile and that the different ages of
investments will impact on fund performance and returns.
Since inception:

private capital of $223.30 million has been raised

91 individual companies have been invested in the program

95 professionals have been developed through the 13 fund managers.
SUPPORT TO CUSTOMERS
Companies eligible for investment by IIF fund managers must, amongst other things:

be commercialising research and development activities

have a majority of its employees (by number) and assets (by value) inside Australia at
the time the licensed fund first invests in the company

have an annual revenue over the past two years of income that does not exceed
$5 million per year.
Investee companies supported must also be at the seed, start-up or early expansion stage
of their development.
GOVERNANCE
As previously reported, in order to facilitate the role as an investor of venture capital in the
first two rounds of funds licensed under the IIF, PSF and REEF programs, the Australian
Government established five wholly-owned companies:

IIF Investments Pty Ltd

IIF (CM) Investments Pty Ltd

IIF BioVentures Pty Ltd

IIF Foundation Pty Ltd

IIF Neo Pty Ltd.
These companies are collectively known as the IIF Companies.
Each IIF company is wholly owned by the Australian Government and operates under the
legislative framework set by the Corporations Act 2001 and the Commonwealth
Authorities and Companies Act 1997 (CAC Act).
The responsibilities for all the IIF companies are outlined in their respective constitutions
or articles of association. These documents set out the legal framework within which the
companies operate. The IIF Companies directors' roles and responsibilities are outlined in
the IIF Companies’ Boards of Directors' Charter as derived from legislative requirements
under the Corporations Act 2001 and CAC Act 1997. Under current arrangements, the
Directors of the IIF Companies are drawn from members of the VCC.
To date the implementation of the Department’s plan to close the five IIF Companies has
resulted in three of the five IIF Companies being voluntarily deregistered by the Australian
Securities and Investments Commission (ASIC). The deregistration of three of the five IIF
Companies occurred on 23 June 2010. These three deregistered IIF companies are:

IIF (CM) Investments Pty Ltd

IIF Neo Pty Ltd

IIF BioVentures Pty Ltd.
The Department is continuing to work towards the voluntary deregistration of the
remaining two IIF companies (ie IIF Investments Pty Ltd and IIF Foundation Pty Ltd) and is
hopeful of achieving this objective prior to 30 June 2011 unless significant issues preclude
this from happening.
Round 3 of the IIF program was restructured to avoid using the IIF Companies to better
achieve compliance with the Uhrig Review principles. As a result the Australian
Government has invested directly into the licensed funds. This direct investment approach
was also adopted for the Innovation Investment Follow-on Fund program.
The activities of the IIF Companies are described in a separate annual report, the IIF
Investments Pty Ltd and IIF Foundation Pty Ltd Annual Reports.
The role of the VCC is outlined in Section 3 – Corporate Governance.
INNOVATION INVESTMENT FOLLOW-ON FUND PROGRAM
ESTABLISHMENT
On 18 March 2009, the Australian Government announced the Innovation Investment
Follow-on Fund (IIFF) program to provide funding to early stage start-up companies. The
IIFF program is a temporary and targeted program in response to the impact of the global
financial crisis on the availability of venture capital funding to early stage companies
commercialising research. The fund enables selected companies with high potential to
continue to develop and to commercialise research.
The program provides follow-on support to selected existing investments made under
Rounds 1 and 2 of the Innovation Investment Fund (IIF) program, the Pre-Seed Fund (PSF)
program, the Renewable Energy Equity Fund (REEF) program and the ICT Incubators
Program (ICTIP).
The IIFF program will ensure that the most promising investee companies commercialise
new technologies and that services are not abandoned due to the financial constraints
during the global financial crisis. The program will run for a maximum of five years to
2015-16 with the last two years of the program allowing for orderly divestments of
company shareholdings.
Funding for the new IIFF program is sourced from the revolving fund established under the
IIF program in 2000. The IIF revolving fund is comprised of capital returned from
successful exits from IIF investee companies. Through the IIFF program the Australian
Government has helped sustain investee companies and will receive all returns from IIFF
investee company exits.
Applications for the IIFF program opened on 5 June 2009 and closed on 19 June 2009.
Twenty-two fund managers were eligible for the program, with 20 applying for funding.
Assessment of applications involved a competitive process using merit criteria and was
conducted by the IIFF Committee of Innovation Australia.
On 7 July 2009, the IIFF Committee considered applications seeking follow-on funding for
79 investee companies (including three co-investments). The Committee assessed all
applications against the merit criteria. The Committee recommended that 11 fund
managers with a portfolio of 36 investee companies (one co-investment) be supported
totalling $64.41 million, including $0.72 million of recoverable expenses. All successful
applicants have entered into funding agreements with the Australian Government.
OBJECTIVES
The objectives of the IIFF program are to:

respond to the constraint in accessing capital in the global financial crisis

support selected fund managers through the provision of additional follow-on
investment capital

ensure that the early stage venture capital industry in Australia continues to develop

achieve value by targeting investee companies which have the highest potential to
utilise the IIFF program funding to continue to develop

continue to provide the management and entrepreneurial expertise of fund managers
to investee companies

provide funding to investee companies in an expeditious manner

replenish the IIF revolving fund with returns from the IIFF program.
PROGRAM PERFORMANCE
During the 2009-10 financial year:

all 11 fund managers executed governing documents with the Australian Government
by 2 December 2009

program expenditure of $40.93 million (including $0.07 million recoverable expenses)
was made to invest in 25 companies (one co-investment).
Table 2.7 IIFF 2009-10 Expenditure (Australian Government contribution)
Fund Manager
Total
Approved
Funding
Total
Expenditure
($m)
Investees
Supported to
30 June 2010
($m)
Allen & Buckeridge Asset
Management Ltd
7.10
6.51
3
AMWIN Management Pty Ltd
5.44
5.36
1
Coates Myer and Company Pty Ltd
1.91
1.91
1
Divergent Capital Pty Ltd
2.75
2.75
2
10.05
3.50
2
In-tellinc Pty Ltd
2.30
0.42
2
iQ Fund 3 Pty Ltd (trading as
InQbator)
3.95
2.21
4
NEO Technology Ventures Pty Ltd
5.10
3.68
1
Playford Capital Pty Ltd
7.45
0.84
3
Starfish Ventures Pty Ltd
9.85
5.90
4
Start-Up Australia Ventures Pty Ltd
8.51
7.85
2
64.41
40.93
25
GBS Venture Partners Pty Ltd
TOTAL
OUTCOMES
The IIFF fund managers report six monthly to Innovation Australia on their operations,
including the current valuation of investments. Some funds reported valuations of
investments at levels lower than initial cost. No divestments were made during the year.
Through the IIFF, successful venture capital fund managers will be able to provide followon investments to early stage companies that have already received investment capital
under the eligible programs.
SUPPORT TO CUSTOMERS
The IIFF program was open to fund managers supported under the Australian
Government’s eligible venture capital programs: IIF Rounds 1 and 2, PSF, REEF and ICTIP.
Eligible investments were restricted to investee companies already supported by these
programs.
GOVERNANCE
The Minister appointed a Program Delegate for the IIFF who is responsible for obtaining
advice and recommendations from the special purpose IIFF Committee on the technical
merit of applications and then made recommendations to the Minister. The IIFF Committee
has now been revoked. The Program Delegate is responsible for entering into funding
agreements on behalf of the Australian Government with successful applicants and
authorising payments. Innovation Australia oversees the ongoing operation of the IIFF fund
managers through its Venture Capital Committee (VCC).
The role of Innovation Australia is to advise the Program Delegate and the Minister on
non-financial administration matters relating to IIFF, including the extent to which the
IIFF program is meeting its objectives.
Compliance audits of IIFF fund managers commenced in February 2010 and are ongoing.
Three IIFF fund managers were audited during the year and no issues of concern were
reported.
The role of the VCC and former IIFF Committee is outlined in Section 3 – Corporate
Governance.
INNOVATION INVESTMENT FOLLOW-ON FUND CASE STUDY
OFIDIUM
Melbourne start-up company Ofidium Pty Ltd is commercialising a revolutionary new
optical fibre technology, with the help of Australian Government venture capital programs.
“We’ve taken a technology that’s been in use for a number of years in wireless, and we’re
applying it for the first time to optical fibre communications, to deliver more bandwidth at
less cost,” said Ofidium’s chief executive officer Mr Jonathan Lacey.
“The funding from AusIndustry has played a critical role in helping us commercialise our
technology, and turn it into a viable product.”
Ofidium has received support under three of AusIndustry’s venture capital programs, the
Pre-Seed Fund (PSF), the Venture Capital Limited Partnerships (VCLP) and the Innovation
Investment Follow-on Fund (IIFF).
The Australian Government’s venture capital programs are delivered by AusIndustry and
can provide venture capital (PSF, IIFF) and a tax-effective structure (VCLP) to fund
managers. The fund managers are responsible for the commercial decision on which
companies and projects to invest in and also provide their expertise in managing and
growing these early-stage companies.
Ofidium’s fund manager for all three programs is Starfish Ventures Pty Ltd. Starfish
Ventures invests in three specialist areas – IT, biotechnology and cleantech.
“In Ofidium, we saw really strong, innovative Australian technology with global potential,’’
Dr Michael Panaccio, an investment partner at Starfish Ventures, said. “They’re leaders in
their field of expertise, and we received good validation from third parties.
“Optical networks have implications worldwide as bandwidth requirements grow higher,”
Dr Panaccio said.
The Venture Capital programs are designed to assist in commercialising Australian
research and development efforts. Starfish Ventures currently has more than $400 million
in funds under management and more than 40 companies in its portfolio.
Starfish Ventures invests in innovative Australian businesses and currently has over
$400 million funds under management and more than 40 companies in its portfolio.
COMMERCIALISATION AUSTRALIA
ESTABLISHMENT
Commercialisation Australia was announced as part of the 2009-10 Federal Budget and is a
component of the Australian Government’s 10 year vision - Powering Ideas: An Innovation
Agenda for the 21st Century. It will receive funding of $244 million over the five years to
2013-14, with ongoing funding of $82 million a year thereafter. Commercialisation
Australia opened to applications on 4 January 2010.
Commercialisation Australia is delivered as a partnership between Innovation Division and
AusIndustry, and is supported by a network of private sector consultant Case Managers.
The program has an expert committee of independent members appointed by the Minister
(Commercialisation Australia Board) and employs a Chief Executive Officer to provide a
high level of guidance on the program’s implementation, drawing on past private sector
commercialisation experience. The network of Case Managers services regional and
metropolitan centres across Australia.
OBJECTIVES
Commercialisation Australia aims to build the capacity of, and opportunities for, Australia’s
talented researchers, entrepreneurs and innovative firms to convert intellectual property
into commercial ventures, creating high skill jobs and increasing our global
competitiveness. It seeks to achieve this by offering a range of tailored assistance
measures.
The objectives of the program will be achieved through:

providing a range of assistance including initial advisory services, access to experienced
business mentors, and funding for proof-of-concept and early-stage commercialisation
activities assessed against clear selection criteria

providing a single coordinated commercialisation support service with multiple entry
and exit points, and referrals to other sources of support as appropriate

using stringent initial assessment processes to select applicants with high potential for
growth and commercial success, while acknowledging the risk inherent in the pathway
to commercialisation

tailoring support to the timing and needs of individual applicants, taking account of
their stage of development

ensuring efficient delivery by building on current innovation activities and working
with existing service providers

leveraging private capital to maximise the effectiveness of Commercialisation Australia
support

sharing the risks by adopting a mutual obligation approach where appropriate

rigorously monitoring the progress of each participant and, if necessary, redirect
funding from underperforming participants

regularly collecting data and analysing trends to measure the short and long term
impact of the Commercialisation Australia program and to inform future initiatives to
support innovation and commercialisation

enhancing access to business services and domain expertise across the nation.
Table 2.8 Australian Government budget and expenditure at 30 June 2010
2009-10
2010-11
2011-12
2012-13
($m)
($m)
($m)
($m)
Budget
7.83
28.39
43.41
62.06
Commitments
0.00
8.19
1.39
0.05
Payments made
2.25
0.00
0.00
0.00
PROGRAM PERFORMANCE
As at 30 June 2010, 25 customers had signed Commercialisation Australia funding
agreements.
OUTCOMES
Commercialisation Australia has offered financial assistance to support 32 projects across a
wide range of industry sectors, worth a total of $11.88 million, since its commencement in
2010.
Key administrative outcomes are:

Program Guidelines, Ministerial Directions and delegations approved
18 December 2009

the Minister announced the program open to applications on 4 January 2010

the Commercialisation Australia Board was established on 4 February 2010

first offers of grant funding were announced on 15 April 2010.
SUPPORT PROVIDED TO CUSTOMERS
Commercialisation Australia supports Australian companies through one or a combination
of the following four funding components:

Skills and Knowledge

Experienced Executives

Proof of Concept

Early Stage Commercialisation.
Grant funding ranges from $50,000, up to a maximum of $2 million. Other than for the
Skills and Knowledge component, funding recipients are provided with up to 50 cents for
each dollar they spend on eligible project activities. The Skills and Knowledge component
attracts 80 cents of Australian Government funding for every dollar spent on eligible
project activities.
The maximum duration of a funding component ranges from 1.5 years to 2.5 years
(depending on the funding component). If a recipient is in receipt of more than one funding
component (or adds a component to their project during the period of their grant), their
project’s duration will be extended by a period applicable to the new component added.
Case Managers are partnered with participants for the duration of their involvement with
Commercialisation Australia. The Case Manager's key role is to guide participants through
the commercialisation process.
Case Managers have extensive experience in commercialisation. Many have taken their
own products and services to market, and have good networks within industry.
Case Managers assist participants by:

assisting them to identify the skills and knowledge they need

helping them access specialist advice and service

identifying and linking them with appropriate Volunteer Business Mentors

assisting them develop professional networks

providing strategic and operational advice

monitoring their progress.
Volunteer Business Mentors will be a key element of the tailored assistance
Commercialisation Australia offers to its participants.
Small companies and people new to business often do not know who to talk to and how to
make the business connections necessary to develop their intellectual property (IP).
Volunteer Business Mentors are an additional resource who will further assist
Commercialisation Australia participants in this regard.
The diverse range of Volunteer Business Mentors will have hands-on experience in
building and/or selling a business, specialist domain expertise, knowledge of international
markets and extensive networks in an area of expertise. The mentors will be well placed to
offer guidance and practical approaches to assist Commercialisation Australia participants
tackle specific commercialisation hurdles and to build valuable business networks.
GOVERNANCE
Ministerial Directions issued by the Minister under the Industry Research and
Development Act 1986 provide the policy and procedures for administering the
Commercialisation Australia program.
Commercialisation Australia is managed by a Chief Executive Officer (CEO).
Mr Doron Ben-Meir commenced as CEO on 19 April 2010. Innovation Australia (the Board)
through its program specific committee (the Commercialisation Australia Board) provides
the Program Delegate with technical assessments and merit rankings of eligible
applications for the Commercialisation Australia program. In undertaking its role, the
Commercialisation Australia Board considers grant applications under the program and
provides the Program Delegate with recommendations as well as advice on other technical
matters and program administration issues.
The role of the Commercialisation Australia Board is outlined in Section 3 – Corporate
Governance.
CLIMATE READY PROGRAM
ESTABLISHMENT
The Climate Ready program is an element of the $240 million Clean Business Australia
initiative, announced by the Government in its 2008-09 budget statement, to support
innovation projects which address the effects of climate change.
OBJECTIVES
The objectives of the Climate Ready program are to:

support the international competitiveness of Australian industry by encouraging
innovation through increasing research and development (R&D) activities,
proof-of-concept activities and early-stage commercialisation activities that address the
effects of climate change

generate national benefit for the Australian economy and wider community, through
support for the development and commercialisation of new products, processes or
services that address the effects of climate change.
Table 2.9 Australian Government budget and expenditure at 30 June 2010
2009-10
Budgeta
Commitments
Payments made
a
2010–11
2011–12
($m)
2012-13
($m)
($m)
($m)
37.57
18.49
6.53
0.00
0.00
17.37
5.75
0.00
33.40
0.00
0.00
0.00
The original allocation for the program was $75 million. However due to the strong demand for the
Climate Ready program, $3.5 million of uncommitted funds in other programs was transferred to
assist.
PROGRAM PERFORMANCE
During the 2009-10 financial year, the Climate Ready Committee considered
123 applications. Of these, 31 applications were approved for funding, for a total value of
$20.39 million.
Table 2.10 Climate Ready applications considered during 2009-10
Grant Type
Applications
Applications
considered (no.)
approved (no.)a
Applications
approved ($m)
Climate Ready Large grants
31
6
10.84
Climate Ready Small grants
92
25
9.55
123
31
20.39
TOTAL
a
The approved applications number does not include applications approved where the funding offer
was not taken up.
Figure 2.6 Number and value of projects by project category 2009-10
Applications Approved (No.)
Applications Approved ($)
12
$Million / Number
10
8
6
4
2
0
Enhancing waste
recovery
Reducing emissions
Reducing energy use
Renewable energy
technology
Reusing water and/or
reducing water usage
Other
Figure 2.6 data set
Figure 2.6 shows application numbers and values for project categories. The greatest
number of applications was in the reducing emissions category. The greatest value of
applications was in renewable energy technology followed by reducing energy use and
reducing emissions.
Figure 2.7 Number and value of projects approved classified by Australian Standard Research Classification
(ASRC) 2009-10
Applications Approved (No.)
Applications Approved ($)
20
18
16
$Million / Number
14
12
10
8
6
4
2
0
Chemical Sciences
Biological Sciences
Information,
Computing And
Communication
Sciences
Engineering And
Technology
Agricultural,
Veterinary And
Environmental
Sciences
Architecture, Urban
Environment And
Building
Figure 2.7 data set
Figure 2.7 shows application numbers and values as classified by ASRC. The research area
offered the majority of funding was Engineering and Technology (70 per cent in total).
Figure 2.8 Number and value of projects approved classified by Australian and New Zealand Standard
Industrial Classification (ANZSIC) 2009-10
20
Applications Approved (No.)
Applications Approved ($)
18
16
14
$Million / Number
12
10
8
6
4
2
Agriculture,
Forestry and
Fishing
Figure 2.8 data set
M ining
M anufacturing
Construction
Wholesale Trade
Professional,
Scientific and
Technical Services
Figure 2.8 shows application numbers and values as classified by ANZSIC. The division that
received the highest level of funding assistance was Manufacturing (61 per cent of total
funds approved), followed by the Professional, Scientific and Technical Services (18 per
cent).
During 2009-10, the majority of applications approved (52 per cent) were for projects that
included research and development, proof-of-concept and early-stage commercialisation
activities. Thirty-two per cent of applications approved were for projects that included
research and development and proof-of-concept activities and 10 per cent of applications
were for proof-of-concept and early-stage commercialisation projects.
Figure 2.9 Number and value of projects approved by turnover 2009-10
20
Applications Approved (No.)
Applications Approved ($)
18
16
$Million / Number
14
12
10
8
6
4
2
0
<=$500k
>=$500k and <$1m
>=$1m and <$5m
>=$5m and <$10m
>=$10m and <$25m
Figure 2.9 data set
Figure 2.9 shows the number and value of projects approved by turnover. Eighty-four per
cent of funding was provided to companies with an annual turnover of less than $5 million.
Figure 2.10 Value of approvals by grant size as a percentage of total approvals 2009-10
Up to $250k, 4%
M ore than $3m, 24%
>$250k and <=$500k, 43%
>$1m and <=$3m, 21%
>$500k and <=$1m, 8%
Figure 2.10 data set
Figure 2.10 shows the value of approvals by grant size. The percentages are charted as: up
to $250k-4%, $250k to $500k-43%, $500k to 1m-8%, $1m to $3m- 21% and more than
$3m -24%.
Figure 2.11 Number of approvals by grant size as a percentage of total approvals 2009-10
M ore than $3m, 3%
Up to $250k, 13%
>$1m and <=$3m, 10%
>$500k and <=$1m, 6%
>$250k and <=$500k, 68%
Figure 2.11 data set
Figure 2.11 shows the number of approvals by grant size. The percentages are charted as:
up to $250k-13%, $250k to $500k-68%, $500k to 1m-6%, $1m to $3m- 10% and more
than $3m -3%.
OUTCOMES
The Climate Ready program has only been in operation for two years. Thirteen projects
were completed in 2009-10. Fifty-four per cent of these projects were found to be
technically successful and progressing towards commercialisation.
Sixty per cent of the 87 active projects as at 30 June 2010 are either on schedule or ahead
of schedule in meeting contractual milestones. A further 38 per cent of projects are on
track but slightly behind schedule in meeting contractual milestones. Two per cent of
projects are not meeting contractual milestones.
SUPPORT PROVIDED TO CUSTOMERS
Climate Ready is a competitive grants program which aims to support the development and
commercialisation of innovative products, processes and services that address the effects
of climate change. The program, which is closed to new applications, offered grants from
$50,000 up to $5 million on a matching funding basis for research and development, proofof-concept and early-stage commercialisation activities.
It targeted small and medium sized businesses, and offered two types of grants - small
($50,000 to $500,000) and large ($500,001 to $5 million). The small grants support small
business, as well as companies controlled by universities and public sector research
organisations.
The program opened for applications on 28 July 2008 and supported projects that address
the effects of climate change. In response to the four funding rounds 311 eligible
applications seeking $228.13 million have been received. A total of 102 projects worth
$75.95 million in grant funding proceeded through the four funding rounds.
GOVERNANCE
Ministerial Directions issued by the Minister under the Industry Research and
Development Act 1986 provide the policy and procedures for administering the Climate
Ready program.
Innovation Australia (the Board), through its Climate Ready Committee, provided technical
assessments and merit ranking of eligible applications. Applications for $3 million and
above were subject to final assessment by the Board. The Program Delegate, based on the
Board’s recommendation, made a final decision about which projects to support.
The role of the Climate Ready Committee is outlined in Section 3 - Corporate Governance.
CLIMATE READY CASE STUDY
GRANT HELPS CULTURE A NEW GENERATION OF VACCINES
Biotechnology firm Lipotek is researching a whole new way of using vaccines to prevent
disease – as traditional vaccines do – as well as to treat complex conditions like cancer.
As Lipotek’s chief executive officer Dr Ines Atmosukarto explains, this new generation of
vaccines is based on a better understanding of how our immune system works.
The Lipotek team has identified how best to target vaccines to the cells that guard our
body’s immune system.
“Our designer vaccines educate the immune system to recognise and in some cases kill
enemy cells, such as cancer cells,” Ines said.
“Using vaccines to treat cancer means the health system could hopefully do away with toxic
treatments such as chemotherapy.”
With the help of a $500,000 Climate Ready grant from AusIndustry, Lipotek is now testing
its first therapeutic vaccine for a sun-related condition – late-stage melanoma.
The grant helped Lipotek initiate its first phase-one clinical trial in Adelaide.
“This sort of government initiative is terrific,” Ines said.
“It helps keep our universities and our biotech research strong. The longer we can retain
these projects in Australia, the bigger the return to Australian taxpayers, the community,
investors, and shareholders.
“We’re a small company, so attracting government funds has been crucial. It’s often easier
to attract venture-capital funding from the private sector if you’ve received government
funding.”
Ines said applying for the grants was a very good exercise.
“It meant we were forced to re-evaluate our business and product development plans,
when we might have otherwise focussed on more practical activities.
“It took us a few weeks to put together, but we’re finding that we’re using the information
generated for the applications for a variety of other purposes.”
APPENDIX CHART DATASETS
FIGURE 2.6 DATA SET
Figure 2.6 shows a broad distribution of projects funded by project category.
Field
Enhancing waste recovery
Reducing emissions
Reducing energy use
Renewable energy technology
Reusing water and/or reducing water usage
Other
Number of
Applications
Approved
1
10
9
4
4
3
Applications
Approved ($)
0.30
5.63
5.91
6.09
1.60
0.86
Return to document
FIGURE 2.7 DATA SET
Figure 2.7 shows the number and value of projects approved, classified according to the
Australian Standard Research Classification (ASRC) 2009-10.
Field of Research
Chemical Sciences
Biological Sciences
Information, Computing And Communication
Sciences
Engineering And Technology
Agricultural, Veterinary And Environmental
Sciences
Architecture, Urban Environment And Building
Number of
Applications
Approved
1
3
3
Applications
Approved ($)
18
4
14.34
1.71
2
1.34
0.72
0.81
1.46
Return to document
FIGURE 2.8 DATA SET
Figure 2.8 shows the number and value of projects approved, classified according to the
Australian and New Zealand Standard Industrial Classification (ANZIC) 2009-10.
Field
Agriculture, Forestry and Fishing
Mining
Manufacturing
Construction
Number of
Applications
Approved
3
2
16
1
Applications
Approved ($)
1.24
0.78
12.49
1.93
Field
Wholesale Trade
Professional, Scientific and Technical Services
Number of
Applications
Approved
1
8
Applications
Approved ($)
0.33
3.62
Return to document
FIGURE 2.9 DATA SET
Figure 2.9 shows the number and value of projects approved by turnover during 2009-10.
Turnover Range
<=$500k
>=$500k and <$1m
>=$1m and <$5m
>=$5m and <$10m
>=$10m and <$25m
Number of
Applications
Approved
14
3
10
2
2
Applications
Approved ($)
5.73
1.09
10.22
1.59
1.75
Return to document
FIGURE 2.10 DATA SET
Figure 2.10 shows the value of approvals by grant size as a percentage of total approvals
during 2009-10.
Grant Value
Percentage
Up to $250k
>$250k and <=$500k
>$500k and <=$1m
>$1m and <=$3m
More than $3m
4%
43%
8%
21%
24%
Return to document
FIGURE 2.11 DATA SET
Figure 2.11 shows the number of approvals by grant size as a percentage of total approvals
during 2009-10.
Grant Value
Percentage
Up to $250k
>$250k and <=$500k
>$500k and <=$1m
>$1m and <=$3m
More than $3m
Return to document
13%
68%
6%
10%
3%
RE-TOOLING FOR CLIMATE CHANGE PROGRAM
ESTABLISHMENT
The Re-tooling for Climate Change program was announced by the Australian Government
in its 2008-09 budget statement as part of its Clean Business Australia initiative.
Re-tooling for Climate Change was launched in September 2008 as a competitive merit
based grants program.
OBJECTIVE
The objective of the Re-tooling for Climate Change program is:
To help small and medium sized enterprises undertaking manufacturing in Australia to
reduce their environmental footprint, through projects that improve the energy and/or
water efficiency of their production processes.
Table 2.11 Australian Government budget and expenditure at 30 June 2010
2009-10
2010-11
2011-12
($m)
($m)
($m)
15.29
23.96
15.81
Commitments
0.00
7.65
0.84
Payments made
4.91
0.00
0.00
Budget
PROGRAM PERFORMANCE
The Re-tooling for Climate Change program has provided financial assistance to support
52 projects, from a broad cross-section of industry sectors, worth a total of $11.4 million.
Table 2.12 Re-tooling applications considered during 2009-10
Applications
Applications
considered (no.) b
approved (no.) a
Applications approved
($m)a
115
52
11.41
a
The number and value does not include applicants who were offered funding but did not take up the
offer.
b
Represents all applications received.
OUTCOMES
The Re-tooling for Climate Change program has been in operation since September 2008.
Since the inception of the program, 73 projects have been funded to the value of
$14 million. These projects are expected to result in greenhouse gas savings of
69,160 tonnes per annum and water savings of 689 ML per annum.
SUPPORT PROVIDED TO CUSTOMERS
Re-tooling for Climate Change supports organisations undertaking manufacturing in
Australia to reduce their environmental footprint, through projects that improve the
energy and/or water efficiency of their production processes. Grants from $10,000 up to
$500,000 are available on a competitive basis for up to 50 per cent of eligible project
expenditure.
GOVERNANCE
The Minister has issued Program Guidelines which set out the program eligibility criteria
and minimum requirements for assessment of applications and management of grant
contracts.
The Re-tooling for Climate Change Program Ministerial Directions No 1 of 2009 provide the
formal direction to Innovation Australia and set out the merit criteria against which eligible
applications must be assessed and ranked. They also provide for a range of other functions
which Innovation Australia may be asked to perform.
Innovation Australia has delegated its power to recommend applications for grants above
$100,000 to the Climate Ready Committee, and grants up to and including $100,000 to
designated Departmental officials.
The role of the Climate Ready Committee is outlined in Section 3 - Corporate Governance.
COMMERCIALISING EMERGING TECHNOLOGIES
ESTABLISHMENT
The Commercialising Emerging Technologies (COMET) program was established in
November 1999 with funding of $30 million over three years. COMET was established to
increase Australia's sustainable economic growth through stimulating the successful
commercialisation of Australian innovation. COMET received additional funding of $40
million in 2001. Further funding of $100 million as part of the previous Australian
Government's 2004 Innovation Statement enhanced the program, extending it until 201011. The program closed to new applications from 1 January 2010 with COMET services and
assistance being superseded by the Commercialisation Australia program which opened to
applications on 4 January 2010. The COMET program will cease on 30 June 2011.
The COMET program is a merit based assistance program with a strong focus on
mentoring, business management and support. The program is targeted at early growth
companies, individuals and spin off companies. COMET customers are provided with a
tailored package of support to improve their potential for successful commercialisation.
COMET aims to increase the commercialisation of innovative products, processes and
services by supporting access to financial assistance and business development advice.
COMET is delivered by AusIndustry and supported by a network of private sector
consultant business advisers. Business advisers are located in regional and metropolitan
centres across Australia.
OBJECTIVES
The objectives of the COMET program are to:

increase Australia’s sustainable economic growth through stimulating the successful
commercialisation of Australian innovations

build sustainable and high growth firms by increasing prospects for successful
commercialisation of innovations through the attraction of capital and partners.
Table 2.13 Australian Government budget and expenditure at 30 June 2010
Component
2009-10
2010-11
($m)
($m)
11.20
7.60
Commitments
0.00
5.40
Payments made
8.92
0.00
Budget
PROGRAM PERFORMANCE
Table 2.14 COMET applications considered during 2009-10
Applications
Applications
Considered (no.)
Approved (no.) a
Applications approved
($m)b
130
111
7.16
a
Does not include applicants who were offered funding but did not take up the offer.
b
Applications Approved ($) is the value of new approvals only; there was an additional $2.01 million in
variations during the year.
Figure 2.12 Value of approvals by industry sector 2009-10
40%
35%
Percent
30%
25%
20%
15%
10%
Figure 2.12 data set
Arts and Recreation
Services
Health Care and
Social Assistance
Public
Administration and
Safety
Professional,
Scientific and
Technical Services
Information Media
and
Telecommunications
Wholesale Trade
Construction
Electricity, Gas,
Water and Waste
Services
Manufacturing
Mining
Agriculture, Forestry
and Fishing
0%
Retail Trade
5%
Figure 2.12 shows COMET provides assistance to a variety of industry sectors. The highest
levels of assistance in 2009-10, were approved for the Manufacturing and Professional,
Scientific and Technical Services sectors. These two sectors accounted for 64 per cent of
COMET assistance approved during the year.
Figure 2.13 Approvals by turnover size 2009-10
$500K - $5M
11%
<$500K
89%
Figure 2.13 shows 89 per cent of customers approved in 2009-10 reported turnovers of
less than $500,000 per annum, with a significant number of these customers having no
turnover as their company had just been registered. This reflects the demand for skills,
services and knowledge in new businesses.
A longitudinal study of COMET firms commenced in 2006 and will conclude in 2013.
It involves 48 firms selected at random between 2006 and 2009. Survey data is collected by
interview at five points between entry into the program and up to two years after
completion of the COMET program. Information from the study will be used to inform
future program design and evaluation.
OUTCOMES
COMET assists customers to achieve commercialisation outcomes in a variety of ways.
Results by financial year for specific commercialisation outcomes are shown in Table 2.15
and Figure 2.14 below. Overall, the results for 2009-10 are strong (refer Figure 2.15) in
every outcome with the exception of the value of capital raised. Feedback from the
Business Adviser network suggests that the financial market has still not recovered from
the drastic reductions in the availability of capital over the past two financial years. The
number of capital-raising activities achieved indicates that investment interest is high, but
available capital is low.
A number of COMET customers were successful in raising capital, drawing in over
$34.6 million. The reported numbers of new alliances, licenses and agreements were
strong recording higher levels than any preceding year, which may be due to the shortage
of investment capital with companies requiring cash flow to continue operations. The
reported number of outcomes in relation to production, including launching a product or a
service, improved significantly this year with 147 instances.
Table 2.15 Commercialisation outcomes achieved by COMET customers 1999 2001 to 2009-2010a
Commercialisation
outcome
1999
–01
200
1–
02
2002
–03
2003
–04
2004
–05
2005
–06
2006
-07
2007
-08
2008
-09
2009
-10
Capital raisings
43
56
79
74
90
108
177
274
146
145
Value ($m
50.48
41.8
3
41.9
2
100.
8
63.1
2
82.4
73.2
1
103.
3
43.4
4
34.6
2
67
55
62
44
56
111
106
101
Alliances
15
TOTAL
1192
635.09
1
8
3800
Licences
16
16
14
26
18
19
33
19
35
Agreements
21
64
96
77
72
87
158
145
162
196
Production
22
80
77
52
47
49
102
114
114
147
Total
a
117
283
321
291
271
319
581
658
558
35
706
231
1078
804
4105
Adjustments have occurred since last report, due to revised/updated customer reporting.
Figure 2.14 Number of COMET commercialisation outcomes 1999-2001 to 2009 2010 as a percentage of total
commercialisation outcomes
P r oduc t i on, 804, 20%
Capi t al r ai s i ngs ,
1192, 29%
A gr eement s , 1078,
26%
A l l i anc es , 800, 19%
Li c enc es , 231, 6%
Figure 2.14 shows the breakdown of commercialisation outcomes for 1999-01 to 2009-10.
The outcomes are as charted in Table 2.15: 1192 from capital raising (29%), 800 from
alliances (19%), 231 from licences (6%), 1078 agreements (26%) and 804 from
production (20%).
Figure 2.15 Number of COMET commercialisation outcomes as a percentage of total commercialisation
outcomes 2009-10
Capit al raisings, 145,
21%
Product ion, 147, 21%
Alliances, 183, 26%
Agreement s, 196,
27%
Licences, 35, 5%
Figure 2.15 shows the breakdown of commercialisation outcomes for 2009-10. The
outcomes are as charted in Table 2.15: 145 from capital raising (21%), 183 from alliances
(26%), 35 from licences (5%), 196 agreements (27%) and 147 from production (21%).
SUPPORT TO CUSTOMERS
COMET funding is used to subsidise access to third party service providers for activities
which have been agreed with a COMET business adviser.
COMET financial assistance for companies is available through a two tier funding structure:

Tier 1: grant value up to $64,000 (exclusive of GST). The rate of assistance is available
at 80 per cent of the eligible expenditure – Closed to new applicants from 1 January
2010.

Tier 2: grant value of up to an additional $56,000 (exclusive of GST). The rate of
assistance is available at 50 per cent of the eligible expenditure – Available to existing
customers only.
Assistance was also available for individuals, limited to $5,000 (exclusive of GST), to
develop management skills required to progress their innovation towards
commercialisation. Applications closed to individuals from 1 January 2010. Approved
customers can access assistance from COMET for a maximum of two years. These approved
customers also have the opportunity to gain additional assistance through Tier 2.
GOVERNANCE
Innovation Australia operates under directions issued by the Minister under the Industry
Research and Development Act 1986.
The COMET program is administered by AusIndustry under delegation from Innovation
Australia. The financial administration of the program is the responsibility of AusIndustry
under delegation from the Minister. The COMET Committee was revoked with effect 30
June 2010. Innovation Australia will continue to provide oversight and guidance over the
final year of the program in 2010-11.
The role of the COMET Committee is outlined in Section 3 – Corporate Governance.
APPENDIX CHART DATASET
FIGURE 2.12 DATA SET
Figure 2.12 shows the value of approvals by industry sector 2009-10.
Industry Sector
Percentage
Agriculture, Forestry and Fishing
Mining
Manufacturing
Electricity, Gas, Water and Waste Services
Construction
Wholesale Trade
Retail Trade
Information Media and Telecommunications
Professional, Scientific and Technical Services
Public Administration and Safety
Health Care and Social Assistance
Arts and Recreation Services
Return to document
4%
4%
36%
4%
3%
2%
2%
10%
28%
1%
3%
3%
EARLY STAGE VENTURE CAPITAL LIMITED PARTNERSHIPS
ESTABLISHMENT
The Early Stage Venture Capital Limited Partnerships (ESVCLP) program was established
in June 2007 under the Venture Capital Act 2002 (VC Act) and amendments to the Income
Tax Assessment Act 1997 and the Income Tax Assessment Act 1936.
The ESVCLP program uses a key development in the Australian Government’s approach to
its tax-based venture capital programs. This was the introduction of the incorporated
limited partnership (ILP). A world-class venture capital fund structure, the ILP was first
made available to the industry in 2004 through the Venture Capital Limited Partnerships
program and has quickly gained industry acceptance.
The ESVCLP vehicle is a specialised investment vehicle for fund managers seeking to raise a
new venture capital fund to make early stage venture capital investments in Australian
businesses. ESVCLPs can only make investments as provided for under the legislation.
Broadly, these are new equity investments in companies or unit trusts with total assets of
not more than $50 million that do not have property development or financial services as
their predominant activity. An ESVCLP must also divest itself of any holdings once the total
assets of the investee exceed $250 million. An ESVCLP must have its investment plan
approved by Innovation Australia and be structured as a limited partnership, with
committed capital of at least $10 million and not more than $100 million.
OBJECTIVES
The ESVCLP regime will provide an investment vehicle providing flow-through tax
treatment and a complete tax exemption for income, both revenue and capital, received by
its domestic and foreign partners. The regime will progressively replace the PDF program
which provides tax concessions to investors carrying on eligible activities in eligible small
and medium sized entities.
PROGRAM PERFORMANCE
The number of registered ESVCLPs as at 30 June 2010 was six (including three
conditionally registered). This represents an increase of two ESVCLPs since 30 June 2009
and with $80 million being committed under the program of which $40 million
(representing government and private investor co-investment) is from the Innovation
Investment Fund program.
SUPPORT PROVIDED TO CUSTOMERS
The ESVCLP program uses the ILP structure and offers a complete tax exemption to both
domestic and foreign investors on returns made from early stage venture capital
investments.
GOVERNANCE
The ESVCLP program is jointly administered by the Australian Taxation Office (ATO) and
Innovation Australia through its Venture Capital Committee (VCC) with the assistance of
AusIndustry. ESVCLPs are required to operate in accordance with the VC Act and the
relevant Tax Acts. It is the Committee's role to monitor certain aspects of compliance and
administer and take actions as required. Registration applications are decided by the VCC
and ESVCLP activity reports are reviewed for compliance by both the VCC and the ATO. The
VCC deals with registration purposes and the ATO provides the tax concession for partners
registered under the program.
The role of the VCC is outlined in Section 3 – Corporate Governance.
VENTURE CAPITAL LIMITED PARTNERSHIPS
ESTABLISHMENT
The Venture Capital Limited Partnerships (VCLP) program was established in December
2002 under the Venture Capital Act 2002 (VC Act) and amendments to the Income Tax
Assessment Act 1997 and the Income Tax Assessment Act 1936.
Fund managers seeking to raise a new venture capital fund to make investments in
Australian businesses with total assets of not more than $250 million can apply to register
the fund as a VCLP. A fund must have an appropriate investment plan and be structured as
an incorporated limited partnership with committed capital of at least $10 million. VCLP
registration entitles a fund to flow-through tax treatment (it is not a taxing point). Further,
a fund’s eligible foreign investors receive a capital gains tax exemption for their share of
the fund’s gains from eligible investments. The fund’s other investors have their share of
the fund’s gains taxed in their hands.
VCLPs can only make eligible investments as defined by the VC Act and the relevant Tax
Acts. Broadly they are equity investments in companies or unit trusts with total assets of
not more than $250 million that do not have property development or financial services as
their predominant activity.
The VC Act also provides for two other types of registration.
For an Australian resident general partner, registration is available for a specific limited
partnership investment vehicle called an Australian Venture Capital Fund of Funds (AFOF).
Such funds can only make investments in a VCLP or invest in a company in which a VCLP is
a limited partner. To date no AFOFs have been registered.
For tax-exempt foreign residents, registration is available as an Eligible Venture Capital
Investor. Registration allows the entity to make direct investments and disregard any gain
made on disposal of an eligible venture capital investment. To date no investors have been
registered.
OBJECTIVES
The VCLP program is designed to stimulate the Australian venture capital industry by
providing incentives for increased foreign investment which will support patient equity
capital investments in relatively high-risk start-up and expanding businesses that would
otherwise have difficulty in attracting investment through normal commercial means.
PROGRAM PERFORMANCE
At 30 June 2010 there were 37 VCLPs (including five conditionally registered) with total
committed capital of $3.8 billion2. This represents an increase of one VCLP and $16 million
in committed capital over the previous 2008-09 figures. As with the previous year the
primary source of capital continues to be domestic institutional investors, with around
10 per cent coming from foreign investors.
At 30 June 2010, VCLPs held investments in 118 businesses costing $1.4 billion, which they
valued at $1.7 billion.
OUTCOMES
During the year, VCLPs reported making 113 investment deals in which $141 million was
invested into 59 businesses. Twelve of the deals were initial investments into companies,
and 101 were follow-on investments. While there were more investment deals than the
previous financial year in which 95 deals were made, the total amount invested decreased
from the 2008-09 figure of $295 million.
DIVESTMENTS
Three VCLPs reported three divestments during the year realising $25.7 million from
investments that cost $24.8 million, recording a capital gain of $0.9 million. This is a
reduction over the previous year in which eight divestments occurred realising a total
capital gain of $6.3 million.
SUPPORT PROVIDED TO CUSTOMERS
A VCLP receives flow-through tax treatment - that is, it is not a taxing point. Eligible foreign
investors in a VCLP are exempt from income tax on profits or gains derived from the sale of
eligible investments by the VCLP. A VCLP’s other investors have their share of the VCLP’s
gains taxed in their hands. The general partner of a VCLP has its share of the gains made by
the VCLP on the sale of eligible investments (the carried interest) taxed as capital gain.
GOVERNANCE
The VCLP program is jointly administered by the Australian Taxation Office (ATO) and
Innovation Australia through its Venture Capital Committee (VCC) with the assistance of
AusIndustry. VCLPs are required to operate in accordance with the VC Act and the relevant
Tax Acts. It is the VCC’s role to monitor certain aspects of compliance and administer and
take actions as required. Registration applications are decided by the Committee and VCLP
activity reports are reviewed for compliance by both the Committee and the ATO. The VCC
deals with registration purposes and the ATO provides the tax concession for partners
registered under the program.
The role of the VCC is outlined in Section 3 – Corporate Governance.
2
This is a headline figure as most VCLPs have a unit trust attached through which committed capital can be invested.
This enables fund managers to acquire otherwise attractive investments that are deemed ineligible for a VCLP.
PHARMACEUTICALS PARTNERSHIPS PROGRAM
ESTABLISHMENT
The Pharmaceuticals Partnerships Program (P3) was a competitive, merit-based grants
program announced in the May 2003 Budget as a five-year, $150 million competitive
grants program. P3 funding was provided for a portfolio of projects rather than an
individual project. The program operated from 2004-05 to 2008-09.
Under P3, successful applicants of Rounds 1 and 2 received 30 cents for each additional
dollar they spent on eligible pharmaceutical R&D in Australia, up to a total grant amount of
$10 million. Successful Round 3 applicants received 50 cents for each additional dollar they
spent on eligible pharmaceuticals R&D in Australia up to a total grant amount of $10
million.
OBJECTIVES
The objective of P3 was to increase the amount of high-quality pharmaceuticals R&D
activity in Australia throughout the entire value chain including biotechnology, originator
and generic medicines companies.
The program focused on developing medicines for global markets and encouraged
international firms to foster partnerships with local companies.
Table 2.16 Australian Government budget and expenditure at 30 June 2010
2009-10
($m)
a
Budgeta
0.00
Commitments
0.00
Payments made
2.15
There is no Australian Government budget for P3 for 2009-10. Payments made were against amounts
accrued in 2008-09.
PROGRAM PERFORMANCE
There were three funding rounds for P3 with decisions in the 2003-04, 2004-05 and 200607 financial years. Over the three rounds a total of 47 applications were considered for
grant support of which 24 applications worth $162.033 million were approved. Of the
approved applications one company did not accept the offer of funding and one was
successful in both Round 1 and Round 3.
Over the life of the program P3 companies undertook $1,160.80 million of eligible
pharmaceuticals R&D in Australia against a target of $1,334.24 million.
The figure of $162.03 million exceeds the $150 million provided for the program due to the decommitment
of funds from earlier rounds being made available in later rounds.
3
OUTCOMES
Successful applicants were drawn from across the pharmaceutical industry and included
biotechnology companies, generic medicine companies and originator pharmaceutical
companies. During of the life of the program 22 companies accepted funding offers, one
accepting an offer under both Round 1 and Round 3, with nine subsequently withdrawing
from the program. The 22 participants included 14 biotechnology companies, six originator
pharmaceuticals companies and two generic manufacturers.
From the commencement of the program to its conclusion on 30 June 2010, the program
paid $72.84 million in grant funding representing a $226.91 million increase in companies’
eligible R&D expenditure.
GOVERNANCE
Innovation Australia, through its Pharmaceuticals Committee assessed applications and
made recommendations on all matters relating to the functions of the Board under P3.
Pharmaceuticals Partnerships Program Directions No. 1 of 2003, No. 1 of 2004 and No.1 of
2006 set out the policies and procedures to be followed by Innovation Australia in
administering the program.
The role of the Pharmaceuticals Committee is outlined in Section 3 - Corporate Governance.
POOLED DEVELOPMENT FUNDS
ESTABLISHMENT
The Pooled Development Funds (PDF) program commenced on 30 June 1992 and operates
subject to the Pooled Development Funds Act 1992 (the PDF Act), the Pooled Development
Funds Regulations 1992, and both the Income Tax Assessment Act 1936 and 1997, and the
Income Tax Rates Act 1986. The program was closed to new registrations on 21 June 2007
and replaced by the Early Stage Venture Capital Limited Partnerships (ESVCLP) program.
PDFs are venture capital funds, structured as a company, that must operate and make
investments in accordance with the requirements of the PDF Act. Broadly the PDF Act
requires that investments are new equity investments in growing Australian companies
with assets of not more than $50 million that are not undertaking retail sales or property
development as their primary activity. PDFs may provide management assistance to
companies in which they hold an investment and may provide debt financing in limited
circumstances.
The PDF Act also provides special provision for tax-exempt foreign superannuation funds
to register as Venture Capital Entities. Registration allows the entity to invest venture
capital into qualifying Australian small and medium sized entities. Currently there are no
Venture Capital Entities registered.
OBJECTIVES
The PDF program was aimed at stimulating Australia's venture capital sector and
increasing the pool of venture capital available to fund the growth of small and medium
sized Australian companies.
PROGRAM PERFORMANCE
In view of the closure of the PDF program to new applications the Venture Capital
Committee (VCC) has increased its compliance approach and has targeted inactive PDFs
with the aim of revoking their registrations. Existing PDFs continue to operate and will do
so until each has been revoked individually.
At 30 June 2010 there were 59 venture capital funds registered as PDFs. This represents a
reduction of 10 during 2009-10 and an overall reduction of 39 since the closure of the
program in 2007.
At 30 June 2010 PDFs reported holding investments in 63 companies costing
$79 million which they valued at $96.2 million.
During 2009-10 PDFs reported investments totalling $1.2 million in 10 Australian
companies. They reported 22 full and partial divestments. PDF divestments realised a total
of $7 million from investments costing $12.4 million for a loss of $5.4 million.
PDFs reported raising a total of $7.6 million in new capital during the year. Capital was
raised primarily via private placements or the exercise of options.
PDFs reported a total of $184.9 million in paid-up capital as at 30 June 2010, with an
additional $3.8 million available from investors.
Note: PDFs provide annual reports four months after the end of each financial year (i.e by 31 October). The
information above has been derived from reports received at the time of preparing this publication
(September 2010). For this reason the information should not be taken to be a full and complete
picture of the program’s activity. Finalised figures will be made available on the AusIndustry website
after 31 October 2010.
OUTCOMES
Since the program's introduction in July 1992, $978 million has been raised by PDFs and
$823 million of this capital has been invested into 722 Australian businesses.
SUPPORT PROVIDED TO CUSTOMERS
Venture capital funds registered under the program are taxed at 15 per cent on their
income from eligible investments. Shareholders in these funds receive their returns tax
free and are not subject to tax on any capital gains they may receive from selling their PDF
shares.
GOVERNANCE
The PDF program is administered by Innovation Australia through the VCC with the
assistance of AusIndustry. PDFs are required to operate in accordance with the PDF Act
and the relevant Tax Acts. It is the VCC’s role to monitor certain aspects of compliance and
administer and take actions as required. The VCC deals with discretions under the PDF Act
and the Australian Taxation Office provides the tax concession for partners registered
under the program.
The role of the VCC is outlined in Section 3 – Corporate Governance.
RENEWABLE ENERGY EQUITY FUND
ESTABLISHMENT
The Renewable Energy Equity Fund (REEF) program is a specialist renewable energy
venture capital fund established in 2000 and modelled on the Innovation Investment Fund
program. In 2009 the Australian Government established the Australian Centre for
Renewable Energy (ACRE) within the Department of Resources, Energy and Tourism.
ACRE has policy responsibility for the REEF program.
The REEF program assists the development of companies that are commercialising R&D in
renewable energy technologies. The REEF program will help capture the spill-over benefits
from improved renewable energy technologies, including reduced greenhouse gas
emissions and growth of the energy management and environment technology sectors.
The Australian Government has awarded a 10 year licence to the private sector fund
manager, CVC REEF Limited, to invest REEF program capital into companies that are
helping industry to achieve ecologically sustainable development outcomes.
The Australian Government has committed $17.7 million to the program on a 2:1 basis
with private sector capital creating a total fund of $26.6 million.
OBJECTIVES
The objectives of the REEF program are to:

encourage the development of companies and other incorporated bodies which are
commercialising R&D in renewable energy technologies, by addressing capital and
management constraints

develop fund managers with investment experience in the renewable energy industry.
The REEF fund became fully drawn in December 2008, with no further capital available for
investment.
Table 2.17 Australian Government expenditure for REEF investments in 2009-10
Fund manager
Investment
Expenditure ($m)
Number of investee companies
CVC REEF
0.0
0
PROGRAM PERFORMANCE
At 30 June 2010, 13 investee companies had been supported under the REEF program. The
amount invested (including the reinvestment of funds) since inception of the program
totalled $21.57 million, of which the Australian Government provided $14.38 million.
No investments were made and no returns were received in 2009-10. In total, to
30 June 2010 REEF has returned $8.05 million to the Australian Government. The returns
have been used towards repayment of the Australian Government’s investment.
OUTCOMES
The REEF program has enabled venture capital investment in renewable energy
technologies. It has aided the commercialisation of Australian technologies for renewable
energies including, biofuels, geothermal, ocean waves, battery energy and wind power. The
program’s successes include two investee companies currently listed on the Australian
Stock Exchange.
SUPPORT PROVIDED TO CUSTOMERS
Companies eligible for investment by the REEF fund manager were required, among other
things, to:

be commercialising renewable energy technology

have a majority of its employees (by number) and assets (by value) inside Australia at
the time the licensed fund first invests in the company

have an annual revenue over the past two years of income that does not exceed
$5 million per year.
Companies supported were also at the seed, start-up or early expansion stage of their
development.
GOVERNANCE
Ministerial Directions issued by the Minister under the Industry Research and
Development Act 1986 provide the policy and procedures for administering the REEF
program.
Innovation Australia oversees the operation of the REEF fund manager through its Venture
Capital Committee (VCC). The licensed fund manager reports six monthly on their
operations, including the current valuation of investments.
The role of the VCC is outlined in Section 3 - Corporate Governance.
PRE-SEED FUND PROGRAM
ESTABLISHMENT
The Pre-Seed Fund (PSF) program was introduced in 2001 to help increase the
commercialisation of promising research and development (R&D) opportunities at the
Pre-Seed stage within Australian universities, Cooperative Research Centres (CRCs) and
Australian public sector research agencies. It seeks to further develop the management and
entrepreneurial skills of public sector researchers and to encourage the private sector to
take a more active role in funding and managing the commercialisation of research from
universities and public sector research agencies.
The Australian Government has committed capital of $72.70 million to the PSF program
which, when combined with capital from private sector investors, universities and public
sector research agencies, amounts to $104.11 million in available commitments. These
commitments cover investments and management fees.
The PSF program has established four venture capital funds to invest in companies or
projects, and to provide management and technical advice to commercialise the technology
being developed. Pre-Seed investments of up to $1 million are made in a company or
project, with investment above this cap at the discretion of Innovation Australia.
Ultimately, the funds will divest their interest in successful companies and projects to later
stage investors and will distribute the proceeds to all investors including the Australian
Government.
In view of the high risk of the investments made under the PSF program, on the realisation
of investments the Australian Government will receive an amount equivalent to its
committed capital and private investors (including the fund manager) will share all
distributions (i.e. profit) in excess of this amount.
OBJECTIVES
The objectives of the PSF program are to:

assist the commercialisation of R&D activities undertaken by universities and public
sector research agencies by providing finance and managerial advice

encourage private sector investment in R&D activities undertaken in universities and
public sector research agencies for commercialisation

build linkages between universities, public sector research agencies, the finance
community and business for the commercialisation of R&D activities

build entrepreneurial and intellectual property management skills in Australian
universities and public sector research agencies

encourage researchers in universities and public sector research agencies to consider
the commercial opportunities of their research discoveries.
Table 2.18 Australian Government budget and expenditure at 30 June 2010
2009-10
2010-11
2011-12
($m)
($m)
($m)
13.09
3.00
0.00
Commitments
7.63
3.00
0.00
Payments made a
5.46
0.00
0.00
Budget
a
The ‘Payments made’ figure includes management fees and recoverable expenses of
$2.14 million.
Table 2.19 Australian Government expenditure for PSF investments in 2009-10
Investment
expenditure ($m)
Number of investee
companies/projects
Allen & Buckeridge Asset Management
Ltd
1.58
4
GBS Venture Partners Limited
1.30
7
Starfish Ventures Ltd
0.07
1
SciVentures Investments Pty Ltd
0.37
4
3.32a
16
Fund manager
TOTAL
a
The investment expenditure figures for 2009-10 are based on information provided in fund manager
call notices. All investments made in 2009-10 were follow-on investments.
SUPPORT PROVIDED TO CUSTOMERS
Support is provided by the funds as venture capital investment into companies or projects
established to commercialise research.
To be eligible for investment, companies and projects must be commercialising Australian
research and either:

be controlled (or, in the case of a project, supervised) by a university, a public sector
research organisation or a qualifying researcher

use intellectual property that is at least 50 per cent owned by a university, a public
sector research organisation or a qualifying researcher.
Investee companies must also be incorporated in, and operate substantially in Australia,
and projects must be undertaken in Australia. Neither must have generated any sales
revenue.
PROGRAM PERFORMANCE
From 2002, when the funds became operational, to 30 June 2010, the four PSF funds have
invested $61.31 million into 71 investee companies and projects. The Australian
Government’s contribution was $42.80 million.
In 2009-10, $4.79 million was drawn down for investment into 16 companies and projects,
of which $3.32 million was drawn down from the Australian Government. The four PSFs
are now focussing on growing investee businesses in preparation for making exits and
achieving realisations. As a result, all 16 were follow-on investments.
In 2009-10, the Australian Government received returns from three investees within the
program totalling $0.38 million, with $0.16 million returned to private investors. At 30
June 2010, the total returned to the Australian Government was $0.92 million.
OUTCOMES
Pre-Seed Fund managers have been instrumental in promoting venture capital as an
approach to commercialising public sector research.
Since inception:

private capital of $31.41 million has been raised

71 investments have been made

2,530 investment proposals have been reviewed by the fund managers

21 professional venture capital managers have been engaged in running the funds.
GOVERNANCE
Ministerial Directions issued by the Minister under the Industry Research and
Development Act 1986 provide the policy and procedures for administering the
PSF program.
The PSF is administered by the Venture Capital Committee (VCC) on behalf of Innovation
Australia.
The role of the VCC is outlined in Section 3 - Corporate Governance.
To facilitate the Australian Government’s investment of capital into the venture capital
funds licensed under the PSF, the Australian Government is using the previously
established wholly-owned company, IIF Investments Pty Ltd.
(ACIS STAGE 2) MOTOR VEHICLE PRODUCER R&D SCHEME
ESTABLISHMENT
The ACIS Stage 2 Motor Vehicle Producer R&D Scheme (MVP R&D Scheme) was introduced
on 24 June 2004 by the Australian Government to encourage Australian motor vehicle
producers to invest in high-end R&D technologies. The MVP R&D Scheme was established
under the legislative framework contained in the ACIS Administration Act 1999.
The MVP R&D Scheme is a part of the post-2005 assistance package for the Australian
automotive industry and will provide funding for R&D from 2006 to 2010.
OBJECTIVES
Through the MVP R&D Scheme, the Australian Government aims to increase the level of
R&D undertaken by motor vehicle producers in the Australian automotive industry.
SUPPORT PROVIDED TO CUSTOMERS
The MVP R&D Scheme is competitively based and offers up to $150 million in R&D
assistance from 2006 to 2010. The MVP R&D Scheme is accessible to Australian motor
vehicle producers and successful projects will receive 45 cents, in the form of duty credits,
for each dollar spent on eligible R&D. Projects funded under the MVP R&D Scheme are
expected to involve a diverse range of new and emerging technologies resulting in benefits
such as vehicle weight reduction, fuel economy, emissions improvements, and improved
vehicle safety.
OUTCOMES
Two application rounds were undertaken in 2005 and 2006 resulting in three Australian
Motor Vehicle Producers (MVPs) being awarded funding for a total of 12 R&D projects. The
total project value for the two rounds was $289 million, with committed Scheme funding of
$141.7 million.
Assistance worth $55.5 million has been paid to 30 June 2010.
PROGRAM PERFORMANCE
During 2009-10, AusIndustry identified a significant underspend in the Scheme. Difficult
economic conditions affected the expected outcomes of several projects. Approximately
$50 million of approved funding will not be spent by the end of the Scheme on
31 December 2010.
The Minister signed the ACIS Stage 2 Motor Vehicle Producer Research and Development
Scheme Variation 2009 (No. 1) on 11 December 2009 to bring $50 million back to the
general ACIS funding pool for the MVPs, reducing the Scheme to $92.8 million.
On 4 November 2009, the Green Car Innovation Committee met to consider a project
variation for Ford Motor Company of Australia Ltd’s Round 1 ‘State of the Art Engine
Initiatives for the Ford Falcon and the Ford Territory Model Ranges’ project. The variation
was recommended by the Green Car Innovation Committee and it was approved by the
program delegate. The variation amended the agreed activities and increased the funding
commitment for the project by 11.83 million duty credits back to the maximum approved
funding of 27,977,797 duty credits.
GOVERNANCE
The MVP R&D Scheme is administered by AusIndustry. Innovation Australia through the
Green Car Innovation Committee (GCIC) oversees residual projects of the MVP R&D
Scheme. From time to time the GCIC acts as an independent expert panel to undertake
technical assessments and rank R&D projects and provides recommendations to the
Minister’s delegate, the Secretary of the Department of Innovation, Industry, Science and
Research.
The policies and procedures to be followed by Innovation Australia are set out in
Ministerial Directions issued under the Industry Research and Development Act 1986 in
2004.
The role of the GCIC is outlined in Section 3 – Corporate Governance.
COMMERCIAL READY PROGRAM
ESTABLISHMENT
The Commercial Ready program was announced on 6 May 2004 as part of the previous
Australian Government's $5.3 billion Backing Australia’s Ability – Building Our Future
through Science and Innovation package. The program combined elements of the previous
R&D Start, Biotechnology Innovation Fund and the Innovation Access (Industry) programs.
Commercial Ready was launched on 1 October 2004 as a competitive grants program
aimed at providing small and medium sized businesses with funding to undertake research
and development, proof-of-concept and early-stage commercialisation activities.
The program was initially funded to provide approximately $200 million per year in grant
funding until 2011. On 1 May 2007, the former Australian Government announced an
additional $90.3 million to fund Commercial Ready Plus, a funding stream specifically
intended to provide small grants, between $50,000 and $250,000, to Australian companies.
The program was closed to new applications as a result of the Australian Government's
2008 Federal Budget announcement. Existing contracts under the program continue to be
monitored.
OBJECTIVES
The objectives of the Commercial Ready program were to:

support the international competitiveness of Australian industry by encouraging
innovation through increasing the level of research and development (R&D), proof-ofconcept and early-stage commercialisation activities undertaken by Australian
companies

generate national benefit for the Australian economy and wider community, including
for example, through increasing productivity, supporting collaboration and developing
Australia’s skills base.
Table 2.20 Australian Government budget and expenditure at 30 June 2010
Budgeta
2009-10
2010-11
2011-12
($m)
($m)
($m)
41.33
11.70
2.00
0.00
8.88
0.20
28.28
0.00
0.00
Commitments
Payments madea
a
All commitments and payments for Commercial Ready, REDI, R&D Start are made against this
allocation.
PROGRAM PERFORMANCE
Although the program is not open to new applications, all existing contracts continue to be
honoured.
As at 30 June 2010, 47 customers continue to be managed under the Commercial Ready
program.
OUTCOMES
Commercial Ready has provided financial assistance to support 524 projects across a wide
range of industry sectors, worth a total of $495.36 million, since its commencement in
2004. Of these, 466 projects have been completed to date with 380 considered to be
technically successful with results to be commercialised. One hundred and twenty seven
projects were completed in the 2009-10 financial year. Seventy eight per cent of these
projects were found to be technically successful and progressing towards
commercialisation.
Fifty eight per cent of the 47 active projects as at 30 June 2010 are either on schedule or
ahead of schedule in meeting contractual milestones. A further 36 per cent of projects are
slightly behind schedule in meeting contractual milestones. Six per cent of projects are not
meeting contractual milestones.
SUPPORT PROVIDED TO CUSTOMERS
Commercial Ready provided Australian companies with grant funding from $50,000, up to
a maximum of $5 million to undertake research and development, proof-of-concept and
commercialisation activities. Grant recipients were provided with up to 50 cents for each
dollar they spent on eligible project activities.
Commercial Ready projects were funded for a maximum period of 3.5 years, while projects
funded under Commercial Ready Plus could be funded for up to two years. Grant
instalments were paid quarterly in advance after the receipt of satisfactory project
progress reports, and on a six-monthly basis for Commercial Ready Plus projects.
GOVERNANCE
Ministerial Directions issued by the Minister under the Industry Research and
Development Act 1986 provide the policy and procedures for administering the
Commercial Ready program.
The Innovation Grants Committee has responsibility for monitoring and assessing requests
for variations and other matters as required under grant agreements for the Commercial
Ready program.
The role of the Innovation Grants Committee is outlined in Section 3 - Corporate
Governance.
RENEWABLE ENERGY DEVELOPMENT INITIATIVE
ESTABLISHMENT
The Renewable Energy Development Initiative (REDI) was announced on 15 June 2004 as
part of the previous Australian Government's white paper, Securing Australia’s Energy
Future, in which it outlined its comprehensive approach to addressing the greenhouse gas
challenges associated with the production and use of energy.
The $100 million program was established as a competitive merit based grants program to
support the development of renewable energy technology products, processes or services
that had strong early-stage commercialisation and emission reduction potential.
The REDI program closed to new applications in May 2008. Existing contracts under the
program will continue to be managed for the duration of their project contract. There are
currently five active customers in the program.
OBJECTIVES
The objectives of the REDI program were to:

support the development of new renewable energy technology products, processes and
services that have strong early-stage commercialisation and emission reduction
potential

support the international competitiveness of Australian industry by encouraging
innovation through increasing the level of research and development (R&D) activities,
proof-of-concept and/or early-stage commercialisation activities undertaken by
Australian companies

generate national benefits for the Australian economy and wider community, including
for example, through increasing productivity, supporting collaboration and developing
Australia’s skills base.
In supporting such projects, the intention of the program was to reduce the environmental
impact of energy demand, contribute to the international competitiveness of Australian
businesses and generate national benefits for the Australian economy.
Table 2.21 Australian Government budget and expenditure at 30 June 2010
a
2009-10
2010–11
2011–12
($m)
($m)
($m)
Budgeta
0.00
0.00
0.00
Commitments
0.00
1.23
0.00
Payments made
4.61
0.00
0.00
All commitments and payments for REDI are funded from within the Commercial Ready allocation.
OUTCOMES
Since the program’s commencement in 2004, REDI has provided financial assistance to
29 projects, worth a total of $65.83 million, to support the development of renewable
energy technologies. To date, 19 of these projects have been completed with 63 per cent
considered to have had successful outcomes.
AusIndustry continues to manage five customers in the REDI program.
SUPPORT PROVIDED TO CUSTOMERS
REDI provided competitive grants to eligible Australian companies to undertake new
renewable energy projects involving R&D, proof-of-concept and early-stage
commercialisation activities. Financial grants ranging from $50,000 to $5 million were
available to companies on a competitive basis, providing up to 50 cents for each dollar they
spent on eligible project activities.
GOVERNANCE
Ministerial Directions issued by the Minister under the Industry Research and
Development Act 1986 provide the policy and procedures for administering the REDI
program. Innovation Australia's former Renewable Energy Committee provided technical
assessments and advice to Innovation Australia in relation to REDI applications.
The Climate Ready Committee is responsible for monitoring ongoing project activity under
the former REDI program.
The role of the Climate Ready Committee is outlined in Section 3 – Corporate Governance.
INDUSTRY COOPERATIVE INNOVATION PROGRAM
ESTABLISHMENT
The Industry Cooperative Innovation Program (ICIP) was announced on 8 October 2004 as
a $25 million program (through to 2010-11) to support cooperative innovation projects.
OBJECTIVES
The ICIP program objectives are to:

encourage business to business cooperation on innovation projects within a sector that
enhances productivity, growth and international competitiveness of Australian
industries - the program will support projects aimed at meeting strategic industry
needs, with a focus on those identified through an action agenda

generate national benefit for the Australian economy.
Table 2.22 Australian Government budget and expenditure at 30 June 2010
2009-10
2010-11
2011-12
($m)
($m)
($m)
Budget
4.21
1.50
0.00
Commitments
0.00
1.48
0.00
Payments made
3.76
0.00
0.00
PROGRAM PERFORMANCE
Over three rounds a total of 105 applications were considered, of which 44 were approved
for funding of $22.34 million. Three applicants subsequently did not take up the offer.
There are currently 12 active customers remaining from Rounds 2 and 3. All Round 1
customers have completed their projects. During this financial year, two projects were
managed to completion with the remaining 10 projects due to be completed by
30 June 2011.
The program assists industry to build its competitiveness by identifying, developing and
adapting new technologies.
The program closes on 30 June 2011.
OUTCOMES
No funding rounds were launched in 2009-10. Ongoing benefits from all ICIP projects will
be assessed through post project reporting, which will be conducted for two years post
30 June 2011.
An evaluation of ICIP is planned for 2010-11.
SUPPORT PROVIDED TO CUSTOMERS
ICIP is a competitive grants program that provides up to 50 per cent matched funding on
cooperative innovation projects. Grants are provided under two streams:

Stream A — supports project scoping or innovation mapping activities. The maximum
grant under this stream is $150,000 for projects of up to 18 months duration.

Stream B — supports R&D, proof-of-concept, innovation demonstration and adaptation
and/or innovation implementation activities. The maximum grant under this stream is
$3 million for projects of up to three years duration.
GOVERNANCE
The policies and procedures of the ICIP program are set out in Ministerial Directions issued
under the Industry Research and Development Act 1986.
ICIP is delivered by AusIndustry, through Innovation Australia. In 2008-09 the
COMET/ICIP Committee, which provided technical assessments and merit ranking of
eligible applications to the program delegate within AusIndustry, was disbanded.
Innovation Australia directly oversees any continuing activity from ICIP.
The role of Innovation Australia is outlined in Section 3 - Corporate Governance.
R&D START PROGRAM
ESTABLISHMENT
The R&D Start program was announced in the previous Australian Government's 1996
Budget as a four year, $520 million competitive grants and loans program where successful
applicants would receive 50 cents in the dollar to undertake research and development
(R&D) and the commercialisation of technical innovations.
The program was extended in 1998 as part of the previous Australian Government's
Investing for Growth statement which provided additional funding to 2001-02. In the
former Australian Government's 2001 Backing Australia’s Ability science and innovation
statement, further funding was announced that continued the administration and
operation of the R&D Start program until 2005-06. The program was again extended in the
2003 Budget continuing it to 2007.
On 10 September 2004, the program was closed to new applications and was absorbed into
the Commercial Ready program from 1 October 2004. Existing R&D Start grants continue
to be managed until the contract completion date, which is five years after the project end
date.
Payments for R&D Start Concessional Loans and Start Premium ceased on 30 June 2006.
Contracts under these program streams will continue to be managed until all repayment
obligations are extinguished.
OBJECTIVES
The objectives of the R&D Start program were to:

increase the number of projects involving R&D activities with a high commercial
potential that are undertaken by companies

foster greater commercialisation of the outcomes

foster collaborative R&D activities in industry and between industry and research
institutions

encourage successful innovation in small companies by supporting commercialisation
of internationally competitive products, processes and services

increase the level of R&D activity in Australia that is commercialised, in a manner that
will benefit the Australian economy

increase the level of R&D conducted that provides national benefit.
Table 2.23 Australian Government budget and expenditure at 30 June 2010
a
2009-10
2010-11
2011-12
($m)
($m)
($m)
Budgeta
0.00
0.00
0.00
Commitments
0.00
0.00
0.00
Payments made
0.58
0.00
0.00
All commitments and payments for Commercial Ready, REDI and R&D Start are made against the
Commercial Ready allocation.
PROGRAM PERFORMANCE
The R&D Start program was closed to new applications on 10 September 2004, and was
absorbed into the new Commercial Ready program from 1 October 2004. The final round of
applications was approved in 2004-05.
OUTCOMES
R&D Start has provided funding of $1,365.37 million to 1,385 projects across a wide range
of industry sectors since its inception in 1996. R&D Start grants funded 1,264 projects to
the value of $1,292.79 million and R&D Start loans funded 121 projects to the value of
$72.59 million. Seven grant projects were completed in 2009-10, and of these, 29 per cent
were considered to be technically successful with the results to be commercialised. All R&D
Start grant projects have now been completed. At the end of the 2009-10 financial year,
there were 40 active R&D Start loan customers still remaining in the program.
SUPPORT PROVIDED TO CUSTOMERS
The R&D Start program provided grant and loan funding, on a competitive basis, to
Australian companies to assist them to undertake R&D and early-stage commercialisation
of technological innovation. Financial assistance was provided on a matching funding basis
for projects that involved R&D, related product development and market research
activities.
While typically ranging between $100,000 and $5 million, grants of up to $15 million were
available. Projects had to have clearly identified commercial potential and applicants were
required to demonstrate that the project could not proceed satisfactorily without R&D
Start support. In addition, applicants had to demonstrate that they could fund their share of
project costs.
R&D Start also provided concessional loans to companies which employed less than 100
staff and were involved in the early commercialisation of technological innovations.
Applicants had to demonstrate that they could meet their share of project costs but were
unable to obtain sufficient funding for the project from financial institutions. Loan projects
are to be completed within three years and the loan repaid within the following three
years. Companies are able to request an Alternative Repayment Arrangement to extend the
timeframe within which the loan is repaid.
GOVERNANCE
The policies and procedures of the R&D Start program are set out in Ministerial Directions
issued under the Industry Research and Development Act 1986.
The Innovation Grants Committee has responsibility for monitoring and assessing requests
for variations and other matters as required under grant agreements for the R&D Start
program.
The role of the Innovation Grants Committee is outlined in Section 3 - Corporate
Governance.