R&D tax incentive benefit cut a blow to Australian innovation
29 May 2015: The Federal Government this week moved to re-introduce legislation to cut the research and development (R&D) tax incentive benefit by 1.5%.
If enacted, the savings measure would mean the higher (refundable) rate of the R&D tax offset will be reduced from 45% to 43.5%. The lower (non-refundable) rates of the tax offset would be reduced from 40% to 38.5% from 1 July 2014, the start date originally announced in the 2014 Federal Budget. The original introduction of the rate reduction failed to gain support in the Senate and the Bill was defeated last year.
Serg Duchini, Deloitte National R&D Tax Leader said the timing of the savings measures was unusual given the proposed review of Australia’s innovation policy as part of the Tax Reform discussion paper, with submissions due next Monday 1 June.
“The R&D tax incentive is one of the Government’s flagship innovation programs. It is acknowledged in the explanatory memorandum to the Bill as the primary mechanism by which the Commonwealth seeks to encourage companies to conduct research and development in Australia,” he said.
“With the growing consensus Australia's future prosperity is linked to fostering innovation and the knowledge-based economy, the incentive has received broad support from industry, and in particular from small business and the start-up community.”
The re-introduction of the cut through the 'Tax and Superannuation Laws Amendment (2015 Measure No.3) Bill 2015' is being put forward as a general Budget savings measure. It comes soon after the introduction of the $100 million annual expenditure cap savings measure.
Duchini added: “This being the case, and given the comparatively shallow pools of venture capital in Australia, businesses would benefit from stability in the R&D tax Incentive program.
“Stability in the system would mean appropriate planning measures can be taken with respect to funding the creation of innovative or disruptive products or services by Australian firms.”
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