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No news is good news - Budget 2017/18 and the R&D tax incentive

Date: 10 May 2017
Author: Kate Mahady
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Last night’s Federal Budget reading by Treasurer Scott Morrison was greeted with a sigh of relief from Australia’s innovative companies.

For months there has been speculation that the Turnbull Government would announce changes to the R&D Tax Incentive program that would again seek to reduce the benefit to companies undertaking R&D.

This follows the R&D Tax Incentive Review report released in April 2016. Dubbed the ‘3F’ report for the Authors Ferris, Finkel and Fraser, the R&D tax incentive review asked its authors to look at ways to ‘improve the effectiveness and integrity’ of the program. More specifically, to rein in costs of the program which has far exceeded original budget expectations back in 2011.

A contentious suggestion of the report was to cap the refundable component of the expenditure to $2M with the remaining R&D expenditure to be carried forward. Understandably, many high intensity R&D companies in the start up stage, particularly biotechnology companies, are alarmed by this suggested measure.

A Government response to the report was expected in ‘early 2017’ but to date, there has been no indication from the Government as to whether they will accept or reject these recommendations, or indeed, impose other changes to the program to reduce the cost. Recently, the Minister for Industry, Innovation and Science would not be drawn on comments in relation to the review report.

The program has seen many changes since its inception in 2011. Companies have found the constant changes or threats to the program have undermined R&D future planning in companies and foreign investment in R&D in Australia. Some certainty in the program and a commitment from the Government of no further changes is desperately needed.

This Budget represents a big shift from last year’s Budget which was framed around innovation and the National Science and Innovation Agenda.

So, while it is good news that there were no negative announcements about R&D tax in the budget, we are still waiting to see if the Government will continue to support innovation and R&D in Australia and will finally put to bed uncertainty in the program to allow companies to move forward with R&D in Australia.

Tags:  R&D, Budget 2018, Ferris, Finkel and Fraser, FFF, R&D Tax incentive review
 
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