Monday, 2 May 2016
Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016; Second Reading
Labor welcomes the opportunity to make a contribution to this debate on the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016. It is an important contribution. Both sides of politics recognise that changes in this area are required and need to be made for a number of very important reasons. We welcome the opportunity also to add comment to the types of things that are being sought to be achieved through this bill.
Labor certainly recognises that jobs of the future will be generated by today's investment in smart, innovative Australian enterprises. With an estimated two out of every three Australian jobs expected to be impacted upon by automation between now and 2030 the challenge is definitely on to create new jobs. That challenge is serious and demands a serious policy response by government. On our side of the chamber, through the release of three waves of innovation policy Labor has proposed a very comprehensive framework of measures designed to encourage the emergence of new, innovative companies in Australia. These policies include: teaching young Australians coding and the value of computational thinking; boosting the numbers of STEM graduates and qualified STEM teachers; creating a start-up university to help launch 2,000 new enterprises every year; providing a $500 million smart investment fund to back new ideas; and establishing a regional innovation fund to encourage talent in our regions to be actively involved in the nation's efforts to become a smarter, richer country. Importantly, Labor has also proposed changes to our taxation system and the rules applying to venture capital in this country, to help ensure money is there to nurture and develop good ideas and to transform them into strong new firms generating jobs of the future.
Why in particular are the types of things that are being encouraged by this bill, and also what the opposition has put forward, important? They are important for a number of reasons. Firstly, and primarily, start-ups typically find it more difficult to access capital than their larger commercial counterparts. This is mainly because of a lack of prior financial history, limited supporting collateral and, ultimately, their risk profile. They are engaged in early-stage innovation, which by its very nature has a greater degree of risk and is something that some financial institutions will not necessarily embrace by extending capital to those types of innovations and to that type of activity at that point and at that stage in their life cycle. It is hard to find that amount of support.
Strengthening capital flows within this ecosystem will deliver substantial support to early-stage innovation. The two major sources of support at this point are, first, angel investment—that is, high net worth individuals on incomes largely around the $250,000 per annum mark who are willing to dedicate some investment towards early-stage innovation companies—and then, later down the track, you will have venture capital enter the field to also support investment through series A and further investment rounds. However, we have not necessarily had the best track record in this space.
We have had a number of communities support early-stage innovation in this country. For example, I note the important role of people in groups such as Brisbane Angels, Sydney Angels and Melbourne Angels, who I have drawn on for their ideas about what needs to be done in this space. I want to thank them on the public record for their assistance, in particular for at an early point bringing me up to speed on the complexities within this space. There are also groups like Scale Investors, which brings together investors and female entrepreneurs to try to boost the level of female entrepreneurship in this country. That is a major challenge which does need to be addressed a lot more vigorously, and I congratulate them and the other angel investors who, quite frankly, have been willing to put their hands into their own pockets to support early-stage investment and innovation without the need for a tax incentive.
While we are very supportive of the types of arrangements that are being put forward in this bill, it is important to place on the public record our gratitude for the investment that angel investors in past years have been willing to direct to early-stage innovation in this country. I certainly think that that is important for us to recognise in this place. We now seek to boost this through these types of arrangements. And to boost it the challenge is real. Angel investors, for example, in 40 deals in 2012 directed about $21 million. We have to do more to lift that figure. It is great that people have been willing to do that, but we need to find a way to unlock capital to ensure that new enterprises emerge and that they create the jobs that Australians will require in the years ahead.
In relation to what is happening in other parts of the world: the UK government, for example, introduced the Seed Enterprise Investment Scheme in 2012 and that recognised in that jurisdiction there were particular difficulties which early stage companies faced in attracting capital. They have had a degree of success. In fact, so much so that both sides of politics in this country have watched very closely the framework that was put in place in the UK and you can see the way it has influenced our respective policy responses. The official United Kingdom HM Revenue and Customs statistics show, for example, that in 2013-14 alone almost 2,000 companies received investment through the Seed Enterprise Investment Scheme, with around 164 million pounds in funds raised for early stage start-ups. Some of the reports that have looked into the success of this scheme in the UK angel market found that promoting angel investing through, for example, Deloittes work promoting angel investing as an asset class with substantial tax benefits is regarded as an important factor to attract new angel investments into the market.
Further, they noted that many angels that they had interviewed had said that they would not have invested in their seed deals without that level of support. It is the type of support that we are trying to encourage in this country. Both sides of politics focused on this, though, admittedly, there are some variations in the way in which we would approach it. But that support in the UK is paying off. For example, when you look at the statistics, nearly 3,000 start-ups received support through that scheme. You cannot for a moment ignore what that would have done in boosting the chances of those enterprises going on to be larger concerns, generating jobs and also making a difference in that UK start-up ecosystem. We certainly see that there is importance in doing that.
On our side of the political fence, we also argued for reforms to the early stage venture capital limited partnerships. We note that this legislation will make some changes in this space. We certainly believe that venture capital funds of between $10 million and $100 million invested in Australian businesses are entitled to preferential tax treatment through the ESVCPL program and that entitles a fund to flow-through tax treatment and its investors to receive a complete tax exemption on their share of the funds income, both revenue and capital. We outlined further changes that we believed could be embraced to promote this. We note that this will be an area that we will continue to focus on should we be granted the opportunity to gain government.
We welcome the fact that the government's announced policies via this bill reflect, in large part, the ideas that we spelt out in November last year, in particular to introduce an Australian angel investment scheme and liberalise the early stage venture capital limited partnership framework. In relation to the angel investment scheme, we argued for an up-front 50 per cent tax deduction for investments up to a maximum of $200,000 per annum. We also advocated: a carry-back tax relief mechanism if investors do not reach the maximum $200,000 cap in any particular year, full capital gains tax exemptions for equity held in start-up ventures held for greater than three years, any realised losses following in the scheme could be deducted against wage and salary income, and deferral of capital gains tax on investment if that investor directs a prior capital gain into a new start-up venture to help keep rolling investment and building support in the sector. We want to see support flow through to early stage innovators as quickly as possible and, considering the time remaining in the parliamentary term, the opposition will largely support this bill.
However, we wish to indicate our intention to review some key elements of the bill if we are successful in winning government and we would indicate one area where we believe that both parties could actually work constructively to benefit the start-up community today. The key elements of the government's legislation, Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016, are: tax incentives providing a 20 per cent carry-forward non-refundable offset on investments which will be capped at $200,000 per year, and a 10-year exemption on capital gains tax for investments held in the form of shares in early stage innovation companies, as they will be defined, for at least 12 months, provided the shares held do not constitute more than a 30 per cent interest in an innovation company.
An early stage innovation company, or ESIC, is defined: as an Australian- incorporated company that is in the early stage of its development and developing new or significantly improved innovations with the purpose of commercialisation. The tax offset will be available upon investment, not when the funds are used by the innovation company, and any sale of the shares will be taxed on a 'deemed capital account' basis. A regulation-making power is also included so that measures can be updated as required, which is an important flexibility mechanism. A number of new arrangements to Venture Capital Limited Partnerships and Early Stage Venture Capital Limited Partnerships are being introduced, notably: a non-refundable tax offset of 10 per cent of the value of new capital invested into Early Stage Venture Capital Limited Partnerships during the income year, an increase in the maximum fund size of Early Stage Venture Capital Limited Partnerships from $100 million to $200 million, improved access to funding from managed investment trusts, and broadened and simplified rules for both Venture Capital Limited Partnerships and ESVCLPs. The tax incentives introduced by the bill will be available to all types of investors.
However, considering the high level of risk associated with investment in ESICs, this bill limits the risk exposure of retail investors to no more than $50,000 per year and sophisticated investors will have no restriction placed on the amount of money they wish to invest, bearing in mind that an offset cap will be applied. Once the bill receives royal assent, the incentives will apply to the 2016-17 income year and the government intends to review the incentives after a period of four years to determine how well they are delivering on policy objectives, which we welcome wholeheartedly.
What is good about this bill? The government has applied a principles based and objectives based test to help determine the legitimacy of a company styling itself as an early stage innovation company—that is a good thing. This will attempt to better target the concessions towards genuine innovation companies and should be welcomed in principle. These measures are reinforced via the application of general anti-avoidance rules, which will apply to prevent taxpayers from being able to obtain tax benefits by entering into artificial or contrived arrangements to access the tax offset. That is another important mechanism, which obviously received support from our side. It has been a longstanding provision and it is an important mechanism in there.
There are some elements of the bill that we consider warrant further consideration down the track. First—and we flagged this to the government—it appears that start-up founders will be prohibited from accessing the tax concessions provided for in the bill. This does seem a little harsh insofar as start-up founders often dig deep into their own pockets to invest in those companies. They do so at great risk and they also sacrifice a great deal in the process. We would certainly be open to reviewing this down the track, to see whether or not this constraint is liberalised.
It has been pointed out that these start-ups can, through their founders, access the support that comes through the R&D tax offset, for instance. A lot of companies and a lot of start-ups indicate that they are very much in favour of the R&D tax concession system. In some cases, start-ups have said to me that it is the defining point as to whether they will stay in Australia or move overseas. If we have that system in place, that is a good thing. Having said that, while the R&D tax offset is very important, we certainly think that consideration should be given to extending that benefit down the track to start-up founders, who, as I said earlier, sacrifice a great deal and are doing important work for the nation's economy. We commit to reviewing this oversight after the bill takes effect.
While overlooking the inclusion of start-up founders and directors in receiving this tax benefit, the bill seeks to improve the targeting and identification of suitable investors—that is, that they are investing in the right type of company in order to qualify tax incentives. The issue with the current structure is that the bill places the onus of reporting primarily on innovating companies themselves and their reporting to the ATO will help later validate the tax offset claim.
Secondly, while prohibiting founders from accessing the concessions, the bill allows trusts and companies to access the benefits. As I indicated earlier, the opposition and the government both modelled their taxation reforms in this area largely on the system that operates in the United Kingdom. This scheme has seen, as I indicated earlier, new enterprises and jobs created. Unlike the UK scheme, which expressly prevents trusts and companies from accessing similar taxation concessions, the coalition will allow trusts and companies to take advantage of these liberalised arrangements. While the specific arrangements in the bill aim to improve tax benefits to investors who make genuine investment in early stage innovating companies, including trusts and companies, this means that minor innovations or practices that do not represent actual innovations—like a company introducing a new product in Australia that is already being sold elsewhere—will not be eligible for tax incentives. While we will not oppose the arrangement allowing trusts and companies to access the tax benefits at the moment, we will leave open the option of reviewing this measure in due course. But we will only make any changes pending the outcome of such review after extensive stakeholder consultations.
Thirdly, under the federal opposition's policies we will not cap the capital gains tax exemption for innovation investors to 10 years, which is what the government proposes in this bill. We take this position because development and commercialisation of ideas takes time. Sometimes start-ups will start on one course with one idea and then pivot to something else, and their development process does take time. That is why our policy will not impose a 10-year cap in the way that the government has. We believe that any capital gains that are immediately directed into new ventures should remain capital gains tax free and that this will help build innovation momentum in this country. Again, we will review the government's legislation in this area in due course.
Finally, Labor note that when the government made the announcement on these types of incentives in the release of its National Innovation and Science Agenda back in early December they did two things. One is that, in the venture capital space, they said that the arrangements announced by this bill would take effect from 7 December, yet on the angel investment side the measures that are being put in place do not take effect until 1 July. As people in the start-up community have pointed out, the unintended consequence of this is that it created an investment hiatus where some potential angel investors would hold off investing in new start-ups or extending angel investment until the new arrangements take effect on 1 July. Some people have dubbed this an 'investor strike'. In late March, we raised our concerns about this. In late March we publicly committed to work with the government on bringing forward the start date of these measures to, at that time, 1 April. The government, frankly, ignored the offer. It is hard to believe that they could see much needed capital being held back from start-ups today in the interests of meeting an artificial, self-imposed start date.
The delay of investment decisions is a real problem and a lot of people have said that it gives them concern—there have been people on public record that have expressed their concern. Some will be very careful about the way that they couch those concerns, because they clearly do not want to be seen as waiting for a tax incentive before making an investment decision, but the reality is just that—that some investors will wait. Given the low level of angel investment in this country relative to other countries—for instance, the $21 million I focused on from 2012—it is important for us to get this moving much quicker, to raise awareness, get new investors in and have that money flow through.
There are people working to help boost angel investment in this space. I note that that last year, for example, KPMG released a very important guide on educating angel investors on the best way to direct their investment to ensure that enterprises and investors understand the process well, and, through that, to encourage more people to put the money into early-stage innovation in this country. There are people there trying to do the work, yet the government, for reasons best known to itself, decided that it would not bring forward the start date. Even though we extended to them the offer and we made that statement publicly, they did not come back to us to work with us on this.
A lot of people, particularly in the start-up space, laud the bipartisanship of both sides of politics on this. I would say in relation to that that bipartisanship would entail collaboration, active engagement and a preparedness to accept ideas on both sides of the fence. Bipartisanship in the eyes of the coalition is that it makes an announcement and expects us to just support it blindly. That is not bipartisanship. It is basically forcing one side of politics to accept that the other side is completely infallible and that it has got its system right. We have seen the way the government have got that system right on equity crowdfunding! We have worked closely—and I do welcome that there has been a commitment to work closer on that particular bill—but again the government makes these announcements and has these things set within the arrangements and then will not accept ideas to work collaboratively to address them.
If you think it is an important policy objective to get more angel investors in, why would you set an arbitrary deadline that will not get more investors in sooner? The government can explain to the start-up community why it believes that it could not have aligned the angel investment start date to the venture capital start date of 7 December. It makes no sense. We will be interested to see in the summing-up report by the government why they did that in that way.
We are certainly happy to support large parts of this legislation. We think it is important to get more money in. We think it is important to encourage angel investors and also those in the venture capital industry who do believe in the inherent talent that exists in this country. We need to see more money go into this space. We do not have a great track record when it comes to venture capital. Compare, for instance, the level of venture capital in this country to the US. Some will say you have to be careful about making these comparisons because of the maturity of the venture capital market in the US, but it gives you a sense of what we have to aim for. Venture capital investment as a percentage of GDP is less than 0.025 per cent. In the US it is greater than 10 times this. Obviously the markets are different and it is not always neat to compare the two but it does give you an indication of the gulf. So we do need to do more.
There is another area where I think we need to do more. In the interim while these arrangements take effect we need to work with other mature venture capital markets to raise awareness of the potential that exists in this country for venture capital. If any trade mission to the US does not include talking with US based venture capital firms to build investment bridges between the two countries, it would be an absolute waste of time for that trade mission. They should ensure we take every single opportunity we can to strengthen investment flows into Australia. There are some funds that are seeking to do this. I note that Signal Ventures, through Niel Robertson and Atlanta Daniel, for example, recently announced a deal that would bring US investors and Australian investors together, not only bringing capital but bringing expertise. These are the types of initiatives that will help in the longer term. We hope, ultimately, to work with the government on these things. It is important for the country and it is important to generate the jobs of the future.
I rise to speak on the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016. I note the comments of the member for Chifley. As I have done in person, I congratulate him on his performance on Q&A a number of weeks ago, along with Assistant Minister Roy, a panel of angel investors and the chap from the University of Sydney involved in quantum computing—I cannot remember his name. It was an extraordinary episode of that program. As I mentioned to the member for Chifley a few weeks ago, I thought it was very constructive and cooperative. It showed what can be achieved with bipartisanship.
I take the comments that the member has made in the spirit in which they were intended because this is very important for our country. Of course it is about innovation. In many respects, whilst we are focusing in this bill on start-ups and the new economy in terms of IT, technology and other things, this nation has a very proud history of being innovative in a whole range of areas. We have had to be innovators by virtue of our geography. In agriculture we have had to be innovators because farming in a country like Australia is not always easy, as you well understand, Mr Deputy Speaker Scott.
I note last week in my home state of Tasmania the investment of taxpayers' money in a monitoring program has attracted additional funds from Bosch Ltd—obviously, a corporate entity. The program is called The Yield, which is about sensors put in fish farms, aquaculture and agricultural settings. Indeed, the catalyst that was provided in this case by taxpayers has now seen additional funding come from a corporate investor.
I note the member's comments in respect of angel investors. He talked about an investor strike. The fact of it is that no investor seeing a good idea in front of them would delay that investment. The notion that a tax deduction or a tax incentive would be justification for not putting money into a good project, an investment that has merit, I think really would not stand up to scrutiny. Indeed, if the investment is good enough the money will flow.
This is very much part of this government's overall plan to transition the Australian economy from the mining industry—itself a very innovative area. Through the construction phase of the mining sector and the jobs it created this country prospered very much. Australia is a leader in innovation within the mining sector. We export that knowledge and those services all around the world to this day and will continue to do that. We have been a global leader for many years in these areas, but our economy is transitioning. The construction phase of the mining sector has pulled back, and we are now into a production phase. The jobs are different jobs. That is why it is very important that as a government we are seeing and are investing in a whole range of measures that will see the Australian economy transition.
Not least of all of those is the Innovation and Science Agenda, which is designed to help develop the skills that are going to be increasingly required for the jobs of the future, for my children and my grandchildren. It is also about supporting great Australian ideas and bringing those ideas to market. This country has a very proud history in R&D, but our track record within the OECD is not such an impressive one in commercialising those initiatives and bringing to market that R&D, which is often some of the best in the world. Perhaps that will change following the investment and announcements we have seen this week in relation to the defence industry plan, which will allow so many small and medium businesses to participate in a very significant investment in very smart and high-tech jobs that will be a support to the Australian economy for many years to come.
We are supporting small businesses, which of course also means we are supporting micro businesses in the area that we are discussing today. The competition law changes that we have seen in response to the Harper review over recent weeks, particularly in respect of section 46 on the misuse of market power and the introduction of an effects test, are showing this government's commitment to small business, to innovation and to encouraging that part of the economy that is so important in driving and encouraging investment within so many aspects of the Australian economy, including the IT and start-up sectors.
There are opportunities through the free trade agreements also. We will see increasingly opportunities for what we hope will be start ups that become businesses that can attract further investment, be it from overseas or otherwise, and export the products and services that they create.
I am a member of the House of Representatives Standing Committee on Education and Employment, chaired by the member for Bowman, Andrew Laming. We are in the middle of a very, very substantial public inquiry into innovation and creativity. We have had a number of submissions and have had public hearings here in Canberra. On Tuesday of last week I was in Melbourne for a public hearing for the inquiry. We have had over 75 written submissions to the committee so far. The inquiry is demonstrating the complexity of this whole space but also the interest that exists within a wide range of people, from business, through academia and vocational education and training, to angel investors and venture capitalists, who see opportunities for greater success within this area. It is a big piece of work that we have undertaken. I thank Richard and his team within the secretariat of the committee for collating the many, many submissions we have had thus far and for organising the public hearings we have had. Last week, as I say, we were in Melbourne, but the following day there were hearings in Sydney and in Brisbane.
We have a proud record of innovation and creativity, but we have challenges in respect of being able to commercialise those. One of the areas that are covered by the National Innovation and Science Agenda is the many smart young Australians who have been forced or have chosen to travel overseas to look for the greater opportunities that they believed have been available to them, particularly in the United States—in California and San Francisco, and Silicon Valley specifically—but also in other parts of the world. I think there is opportunity being created through the establishment of landing pads, whether they be in Silicon Valley or in Israel, most likely in Asia, but I think there is also opportunity to support some of those Australians who have left—and potentially international people—but who would want to come back to Australia. The opportunity to see a landing pad located here in Australia would support the objective that I think all of us in this place, not least the member for Chifley, who spoke earlier, have of unlocking the capital that is available and is looking for a place. I note that one of the real success stories in Silicon Valley is Sam Chandler. While he is a bit younger than me, he did go to the same school as me—I do not know what that says. He is a Tasmanian and we are very, very proud of the work that he is doing in Silicon Valley. We would also be looking for ways that we can attract people of his calibre to our country to support innovation and attract other people to the knowledge that he has gained in the time that he has been overseas.
These are dynamic people, and I again refer to some of the submissions and presentations that we have had throughout our committee hearing process. They are very dynamic and innovative people. It is quite extraordinary to see young people with a drive and an energy that is truly inspiring.
We have some challenges within our educational institutions. Some of the training that we are providing is not allowing these start-up companies to bring people in. While on paper they have those skills, what is happening is that those skills are not the relevant skills that many of these start-up businesses require, particularly around the IT space. We have a lot of work to do within our institutions to make sure that the things that they are learning and the courses that we are offering in this space are in line with the very fast moving changes that are occurring within these start-up businesses. The skills that they need in terms of coding are things that we can start teaching at an earlier age to our primary and high school students. These are skills that are going to be needed.
The bill before the House today and the measures announced in the 2015-16 Mid-Year Economic Fiscal Outlook are all based around the National Innovation and Science Agenda. The complementary tax incentive measures are designed to align the tax system and business laws to encourage that transition that is occurring within our economy from the production phase of the mining industry into a new economy that needs to be more diversified and a base that is based around entrepreneurship and fostering a culture of innovation.
A number of measures that the government has put in place have been tailored to innovation companies as they increase in size, value and the level of their financial activity. For example, schedule 1 of this bill gives effect to tax incentives for early stage investors. This measure provides concessional tax treatment to investment in innovative, high-growth potential start-ups through a 20 per cent carry forward, non-refundable offset on investments and capped initially at $200,000 per year. There is also a 10-year exemption on capital gains tax for investments held in the form of shares in the early stage innovation company for at least 12 months, provided that the shares held do not constitute more than 30 per cent interest in the innovation company. Indeed these are very important measures for being able to attract the right sort of staff with capacity in these areas, along with other incentives that we have made in terms of employee share schemes. These are the sorts of things that will allow start-up businesses to have the best chance of success to be able to convince angel investors and venture capitalists that there is an opportunity and a worthwhile investment to make in a fledgling business.
In respect of section 360-40, there is a list of early stage innovation companies. It is a very technical piece of legislation in respect of who qualifies and who does not. I again take note of the comments made by the member for Chifley, in terms of the support that those opposite are showing for this bill. I note, and I take them in the way that they were intended, some of the additions or modifications that those opposite believe should occur. Through our submission, through the employment and education committee as well, a number of the start-up companies that made representations also looked at the timing in terms of where a company is recognised and at what point it was considered, and, therefore, they might be eligible for such tax concessions. These are things I think that we can work on together, in a bipartisan way, over the coming months and years to make sure that we can create in this country a place where there is a culture of innovation, and foster the investment that needs to flow into the sector.
It is truly a pleasure to be able to step up and support this bill. It represents a considerable path forward for Australia in coming to terms with innovation. But first, I will respond to one of the comments that was made by the previous speaker, the member for Lyons. The member for Chifley pointed out that one of our concerns about this bill is the fact that we are delaying the start date for this bill, and that this was having an impact on the sector to the extent of what one might call 'a capital strike'. The previous speaker, the member for Lyons, has suggested that that was a nonsensical idea, that no-one would not invest in a good project simply for the tax incentive. That is really quite a nonsensical statement. The very fact that we have this legislation here, which is providing an attractive tax framework for angel investors, says that these incentives are in fact useful and worthwhile and will aid companies coming to the fore.
I want to indicate my support for the comments that were made by the member for Chifley in this regard. I think it is unfortunate that the introduction and start date for this particular package has been delayed, because that is having the impact of slowing down the investment as people quite understandably await for the new arrangements to be in place in order for them to have a tax effective investment.
Speaking more generally, the need for a whole raft of legislation, government response and policy in this area cannot be underestimated. We rank very poorly in the OECD. When you look at the overall innovation, we come up reasonably well, but, when you unpack it, you see that we do well particularly in the inputs and we do far less well in the outputs. In terms of some of the basics of education and university research, we are doing reasonably well, but that is not translating into the production of innovative enterprises. We are not taking those necessary parts of the cycle, where we are educating and skilling up our people and doing research in academic institutions or other research bodies, and turning them into viable business opportunities that will create jobs and economic opportunity in this country. Clearly, 'business as usual' is not the path forward.
What we have in the bill here before us today, a package of tax incentives for angel investors, is an important part of the process but certainly not the only response that we need. Investment in research and in early-stage commercialisation of that research by government entities is very, very important. Indeed, there are some commentators in this area that suggest that that might even be a more effective way of promoting innovation than spend money on tax incentives. I think it is very interesting to look at ARENA, the Australian Renewable Energy Agency, and just how effective they have been in fostering innovation in the renewable energy space. Their approach of focusing on early commercialisation, helping companies through the 'valley of death', as it is called, has been producing some quite spectacular results. As I say, this bill is an important measure, but it is part of a suite of measures that we need in order to move forward.
Part of what I think we need to do too is to support initiatives that bring innovative start-ups together with large enterprises—which, because of the very nature of their structure, the need to protect their reputation and the rather bureaucratic structures they have, are not always the best places for fostering a culture of innovation. As we have seen happen very extensively in Europe, when these very large companies get together and collaborate with those in the start-up innovation space, you get some pretty dynamic results. I have been asked to speak for a bit longer here, to keep this going, but it is a pleasure to do so because I think there is some really important, exciting stuff happening.
In Perth we recently had an event called the Unearthed Perth Hackathon 2016. The Perth hackathon has now been in place for a couple of years. It is where the collaborative workspace group Spacecubed, led very ably by Brodie McCulloch, get companies in our resources sector to frame a problem or an issue that they have and then teams working in competition with each other come up with solutions to that particular technical problem. At one of the first hackathons, a very successful project involved Rio Tinto's problem of very large rocks coming into the crusher. The train would come in, and, if there was a very large rock in the mix, they would often have to shut down the crusher for quite some time while they went in manually and found this very large rock and got it out so operations could resume—a very costly issue for such companies, particularly as they want to speed their stuff through and given, as we know, the margins on iron ore are nowhere near what they used to be. At this hackathon, the winning team had noticed that, when there was a large rock in the train, the train vibrated differently. So they were actually able to predict when there was a large rock in the train before it went into the crusher. Work is continuing now on that idea.
At the hackathon that was held earlier this month—another great success—one of the big issues that they were trying to deal with was put to them by Woodside, about how you maximise deck space on oil and gas vessels and how you maximise scheduling. Some great, sophisticated algorithms have been developed by the teams that were competing.
I think that sort of activity, where large companies work with companies that are more flexible, nimble and agile because they lie outside those big corporate structures, is a great way forward, and I want to compliment the Unearthed mob in Perth on doing such a good job in bringing this together.
I am very pleased to say that my very good friend the member for Chifley and I went out to see the premises of FLUX, the latest collaborative workplace that is being developed in Perth, and to see the new resources hub that will form part of that, right on St Georges Terrace, which will be under the able leadership of Kelly Turner. So some really fantastic stuff is going on, and, as I said, we need to have in place a whole suite of measures to encourage innovation.
I want to also acknowledge a submission that was made to the education committee in the last week of sitting, by Zoe Piper. Zoe is from Allaran and she has presented ideas to various parliamentary groups. The idea is to conduct a project similar to what Unearthed do in their hackathons with the resources sector, but with the public sector. Rather than government trying to come up with an answer to various problems, be it something like the Centrelink computer or one of the many other administrative problems and, often, failing spectacularly—rather than go out to contract for a predetermined solution to the problem—allow this level of engagement in the formulation of the solution to the problem. I thought it was a very interesting idea.
I would like, in the final few minutes I have here, to pick up some of the points that the member for Chifley made about what the true nature of a bipartisan approach might look like. It cannot simply be the government saying: 'This is our idea. We want you to agree with it,' and that is bipartisanship. The community, in general, is wanting us to do better on this. We have seen a great amount of goodwill, in this innovation area, across parliament and I compliment all of those who have been involved in the development of the various friends of innovation groups. But, particularly in this area, people are so over the adversarial style of politics that we are going to be in a very challenging and competitive environment, internationally. I would like to think that this is a space where we could start growing up a little bit as a parliament, moving beyond the adversarial structures that are inherent in this place, and devising a path forward where we truly have a committee system dealing with this, where we want to embrace the ideas of all sides or parts of parliament to forge our way forward.
There is great opportunity here. We have a whole new Zeitgeist, a whole new energy that is coming within our community around this space. People are wanting to get out there and create new ideas—not just pizza aps but really substantial innovation and new ways of thinking of things. That is what keeps this a very exciting space: the challenge of looking at a problem from a totally different perspective. That is going to be a challenge for this parliament. If we are to retain our relevance into the 21st century, I believe that the old adversarial structures on which we are absolutely predicated will need a great deal of reform. With that, I conclude my remarks.