La Trobe Business School

Tag: Turnbull Government

Innovation and shared value critical for regional development, says LBS Professor of Practice

Dr Mark Cloney, Professor of Practice, Economics

By Mark Cloney

Could a new approach to regional development policy premised on creating shared value and utilising existing institutional networks be a key catalyst to the implementation the Turnbull government’s national innovation agenda?

The upcoming Federal Budget should outline more details of the government’s national innovation agenda. One way to ensure the successful implementation of the agenda could be to utilise established institutional arrangements and networks that foster regional economic development across Australia’s regions – and not duplicate or marginalise their efforts.

In December 2015 the Turnbull government announced an Innovation Statement that committed $1.1 billion dollars over the next four years to support business based research, development and innovation. A key focus of the Innovation Statement is a desire to strengthen the ties between business, universities and scientific institutions.

Many leading theorists have written on the importance of innovation and regional development to the international competiveness of firms and nations. For example, Harvard business gurus Michael Porter and Mark Kramer (2011) argue for the importance of creating shared value, which focuses on the connections between societal and economic progress including enabling industry clusters. Much of what they say is consistent with the Innovation Statement objectives.

According to Porter and Kramer (2011), policies, collaboration and operation practice that enhances competiveness of a company while simultaneously advancing the economic and social conditions in the communities in which they operate will be the power behind next wave of global growth. They cite firms such as Google, IBM, Intel, Johnson and Johnson, Nestle, Unilever and Wal-Mart as examples of companies that have embarked on shared value initiatives within the communities where they operate. According to Porter, in particular, the success of every business is affected by the supporting companies and soft and hard infrastructure around it and the networks within which they operate (i.e. the microeconomic foundations). Therefore stronger local capabilities in areas such as education and training, R&D, transport services and logistics, supplier collaboration, distribution channels and infrastructure are key to increased competitiveness and innovation. To support industry cluster development, business needs to identify gaps and deficiencies in these areas and enter into closer collaboration with like businesses, peak industry groups, government and universities to collectively address local deficiencies.

Regional Development Australia (RDA) is a national network of 55 committees (including metropolitan RDA’s) made up of local leaders who work with all levels of government, business and community groups to support economic and social development of their regions. This initiative is funded by the Australian Government and supported by state, territory and local governments in all jurisdictions. Most RDAs have at least one university in their catchment area and are at various stages of maturity in their engagement with them. For example, La Trobe University is a board member of both the North Melbourne (NM) RDA and North Link, two regional development bodies who between them cover seven local government areas in Melbourne’s northern suburbs (incorporating La Trobe University’s Bundoora campus).  La Trobe has been supporting these organisations for a number of years and provides facilities for North Link at its R&D Technology Enterprise Centre. The established networks of NMRDA and North Link are all about facilitating R&D research connections with business, industry and the tertiary sector in the northern region with an objective to help local business grow and innovate.

Perhaps options to consider delivering the innovation agenda through policies focused on creating shared value and directing new resources to the existing institutional arrangements and networks of the RDAs would provide an efficient mechanism and real impetus to delivering the government’s innovation vision.

Dr Mark Cloney is a Professor of Practice Economics at La Trobe Business School.

Mark has had 20 years’ experience in the federal government in corporate areas including program design, implementation, evaluation and compliance. He was a member of the Senior Executive Service in the department of Agriculture and completed a PhD with the University of Sydney in 2003 on regional development policy and economic theory.

Michael E. Porter and Mark R. Kramer (2011) The Big Idea: Creating Shared Value, Rethinking Capitalism, Harvard Business Review, Jan- Feb –

North Melbourne RDA – Regional Development Australia web site:

North Link website:

The Reform We Have To Have: The Superannuation Challenge

Mark Morris La Trobe Business School Professor of Practice
By Mark Morris

Like many baby boomers I am reluctantly coming to terms with the need to bump up my superannuation contributions so that I can fund a reasonable lifestyle in retirement.

However, I find it hard to generate much enthusiasm for the prospect given the tantalising alternatives of an annual trip to London or an upgrade of the family car. Nonetheless the rationalist in me knows it is something I should do.

Accordingly, one of the very last things I want to grapple with when I struggle to make extra superannuation contributions is yet another barrage of tax changes to our superannuation laws.

However, I accept that tax changes to our superannuation regime are now inevitable as the costs of maintaining the existing superannuation rules are unsustainable and difficult to justify in the more straightened times we live in.

In part, this is because Treasury’s 2014 Tax Expenditures Statement vividly illustrates the burgeoning costs of maintaining our current superannuation regime most of which was set in place way back in May 2006 when the country was thriving under the mining boom. For example, Treasury estimated that the cost of maintaining the concessional tax treatment of employer sponsored contributions alone would be $18.1 billion for the 2016-17 year.

At the same time the Turnbull Government needs to urgently find sufficient revenue to finance the cuts in corporate and personal tax rates needed to lift national investment and productivity in a period of falling revenues.

In this context it looks increasingly unlikely that such cuts will be fully financed through an increase in the Goods and Services Tax rate and/or base, especially given the Opposition’s commitment to fight such reforms.

Accordingly, the Turnbull Government is slowly but surely building up its rhetoric on superannuation reform including its oft mentioned references to tax reform which is both fair and equitable.

In doing so it rarely refers to the fact that it is easier to sell superannuation reform where the impact of cost savings only hit home at some vague point in the future as opposed to GST reform where increased prices will immediately hit the hip pocket.

You really grasp such reforms are almost fated to occur when the Financial Services Council urge the Federal Government to cut back superannuation concessions for high income earners as they did on January 14. When a peak body representing superannuation and management funds calls for a revamp of superannuation concessions for the wealthy you know that a major overhaul to the superannuation regime is almost certainly on the agenda.

Hence, as there is growing consensus that there needs to be some form of superannuation reform, what policy options are available to effect those changes? Especially if the Federal government wants to generate sufficient revenue to help finance more broad-based tax reform?

In my view the Federal government should consider four major policy changes.

First and foremost there is real merit in revisiting Recommendation 18 of the Henry Tax Review which proposed that the tax on superannuation contributions be abolished, and that superannuation contributions should be taxed as income in the hands of individuals at their marginal rates, albeit subject to a 15% refundable tax offset.

In these circumstances a high income earner subject to the current highest marginal rate of tax of 49% would obtain a 15% tax offset in respect of any employer superannuation contributions made whilst a low income earner on the 19% tax rate would similarly receive a 15% tax offset thereby leading to a more equitable tax treatment of superannuation contributions.

We would therefore avoid the current scenario where a multi-millionaire’s superannuation fund effectively pays 15% tax on contributions received being the same 15% tax rate that would apply to a fund receiving employer contributions made on behalf of a sales assistant deriving an annual taxable income of $40,000.

Deloitte recently championed a variant of this proposal in its publication “Shedding light on the debate – Myth busting tax reform” which it suggested would generate a reform dividend of around $6 billion in the 2016-17 year. Not surprisingly similar changes are also the centrepiece of the recent modelling undertaken by the Financial Services Council in tandem with PWC on possible superannuation reforms.

Second, the Turnbull Government should consider the former Government’s proposal that income derived by a fund in pension mode should only be tax-free up to $100,000 a year with any excess subject to tax at a rate of 15%. Whilst this change was only expected to generate around $350 million back in April 2013 the revenue take from such a proposal could be further increased if transitional relief under that measure was ditched and a more punitive rate than 15% applied to funds generating $300,000 or more taxable income per year.

Third, we should revisit the notion that funds are entitled to a refund for excess imputation credits. It is wholly appropriate that funds should be able to extinguish their 15% tax liability during the contributions phase but another thing altogether to allow them to also get a refund of the 15% surplus franking credits on dividends franked at 30% in the dollar.

Finally, it makes little sense that funds in the contribution phase should only pay an effective tax rate of 10% on any capital gains made, being a one third discount on the 15% tax rate that applies to such funds. In a sense this is a doubling up of concessions as the fund is already subject to a low rate of tax being 15% and does not require an additional CGT concession to encourage investment.

Of course we should all recognise that implementing the above changes will invariably mean that some people are worse off being predominantly high income earners.

As is the case with any tax reform some will lose and will have to wear some grief.

However, such changes are absolutely crucial if we are to sustain a superannuation regime which is both robust and fair, and which will provide the additional revenue needed to finance much needed tax reform.

Put simply, superannuation tax reform is a change we have to have if the country is to prosper.

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