Discussions around the commercialisation of research from the University of Otago will take on a different dimension following a $130 million Government investment into Kiwi research and development.
Otago Chamber of Commerce president Peter McIntyre yesterday said the Budget 2013 announcement to encourage businesses to invest more in research and development, and to support new business start-ups would add depth to the work already being undertaken through the Dunedin City Economic Development Strategy.
Economic Development Minister Steven Joyce had listened to what the regions had asked for and although there was no single ''regional strategy'' in the Budget, there was a chance for Otago to cash in on the R and D money, Mr McIntyre said.
''Because of the work we already do in the city, I believe a significant proportion of that funding will be coming here.
''We are trying to get new businesses to start up, stay and develop in the city and we are a long way to reducing the tyranny of distance. Ultra-fast broadband is part of the equation,'' he said.
In the Budget, Mr Joyce said businesses with a minimum of $300,000 of R and D spending in New Zealand, and at least 1.5% of revenue spent on R and D over the past two years would be eligible for the funding.
After two years of funding, businesses could be reassessed for a further three years of funding. The cap on funding would increase to $5 million a year from $2.4 million.
Student grants would provide support for undergraduate and postgraduate students to work with R and D-active businesses.
''The increased government expenditure will help incentivise real progress towards the Government's goal of business R and D expenditure reaching 1% of GDP,'' Mr Joyce said.
Mr McIntyre said the recent heads of agreement signed between the Otago and Shanghai chambers of commerce opened up investment opportunities, as Chinese businesses were keen to put money into innovative business ideas in New Zealand.
The technology park in Shanghai was likely to hold attraction for some companies developed out of the university. Global companies like Yamaha and Microsoft were in the Shanghai park, he said.
Deloitte Dunedin tax partner Peter Truman said the Government's treatment of ''black hole'' expenditure was a positive step but more needed to be done.
The term black hole expenditure was used to describe a business expense for which no tax deduction was available.
''It has been a sore point for many businesses over time in various situations.''
Among the measures announced in the Budget were: the immediate deductibility for capitalised expenditure on legal and administrative fees incurred in applying for a patent or plant variety rights; making certain fixed-life resource consents granted under the Resource Management Act depreciable for tax purposes; immediate deductibility for all direct costs for listing on the stock exchange.
''The announcements are a good first step from the Government in tackling black hole expenditure but there are still many other areas in which black hole expenditure inappropriately rises. The Government should consider further reforms in these areas as part of its ongoing tax policy work programme.''
Areas Mr Truman suggested in which work could be carried out included unsuccessful debt-raising costs, capitalised research and development expenditure that did not result in depreciable property, equity-raising costs and some land improvements that were currently not deductible.
''These areas remain a big concerns to businesses and we would encourage Government to deal to these. Often the dollars involved are not insignificant and non-deductibility of these costs leads to inequitable results.''
The Budget included an announcement that small innovative businesses be allowed to claim tax losses on R and D as a refund, up to a certain limit, he said.
Allowing the cashing up of losses was a form of government grant. Either way, it was good news for start-ups.
What was proposed should free up cash for start-up companies by allowing a refund of the tax losses incurred through expenditure on R and D.
''Interestingly, this is not a far cry from the 15% tax credit for R and D that the previous National government repealed - albeit on a significantly smaller scale which is likely to be the real difference.''
A key issue for start-up businesses was the speed at which any cash from converting tax losses could be returned to the business, along with the level of compliance required to satisfy the Inland Revenue Department, Mr Truman said.
