Having had many discussions over many years with companies on this topic, my view is that to see heavy R&D investment you need a couple of foundations in place, such as appropriate tax incentives, appropriate regulatory settings for venture capital investments and start ups, supportive immigration regimes etc. Australia’s policy settings have generally been very appropriate for heavy investment industry such as minerals extraction, but less well suited to R&D intensive sectors. This is what you would expect: it’s the large sectors that exert the most sway on any western government. We’re not alone in this - many countries would like to incubate their own version of Silicon Valley. Israel has done spectacularly well at this - most people credit Israel’s high tech defense force for seeding a steady supply of engineers into the start up ranks - rather than their dividend taxation policy. Most levels of government in Australia are aware of the need for supportive policy frameworks and are working towards these. Franking ensures that when these policy settings are in place there will also be funding for them. Ironically, Israeli tech start ups have to import their growth capital, including from Australia!, since whilst they have the innovation they don’t have the funding. So it’s not funding - or franking - that is holding back Aussie R&D.

On 11 urban myths about franking credits -