The government released the R&D Tax Incentive Review report for public consultation last week and called for business, industry and the research community to have their say.
The review, authored by Innovation Australia chair Bill Ferris, Chief Scientist Alan Finkel and Secretary to The Treasury John Fraser, was undertaken with a brief to ‘Identify opportunities to improve the effectiveness and integrity of the R&D Tax Incentive, including by sharpening its focus on encouraging additional R&D spending’.
The group was tasked with ‘ensuring the sustainability’ of the incentive program which costs the government around $3B per year.
Six recommendations were released:
The recommendation garnering the most comment is in relation to the $2m cap on the cash refund payable with many companies, particularly in the biotechnology sector, voicing their alarm at this restriction.
The recommendation to improve the administration of the program and reduce some of the complexity of the program is welcomed and will hopefully bring with it some efficiencies.
The R&D Tax Incentive program, which replaced the previous R&D Tax Concession program from 1 July 2011, has experienced a great deal of change since the legislation was first released.
Our clients talk of the ‘shifting goal posts’ each year, becoming more complex and creating different interpretations of the program.
The rate has recently been reduced by 1.5 percentage points and this report suggests further changes may be imminent.
Frequent change in this tax policy, such as changes to the thresholds and rates, affects investor confidence, both within Australia and globally. This uncertainty and constant change undermines business confidence in the stability of the program and creates unnecessary complexity in the administration and compliance aspects of the program.
We hope the recommendation for simpler administration and the need for test cases to establish parameters is recognised and implemented.
The closing date of submissions for this review was 28 October 2016. Find out more and view submissions at R&D Tax Incentive - Review report and submissions.