Ai Group Calls for Stability to R&D Tax Incentive

August 7th, 2019 Stability to R&D Tax Incentive

Within comments posted by the AFR, Ai Group chief executive Innes Willox has called on the government to abandon proposed reforms to the R&D Tax Incentive, as well as provide increased investment in direct R&D Programmes.

Innes Willox made specific reference to the ‘Intensity Threshold’ test within proposed R&D Reforms as a harmful measure. If introduced, the ‘Intensity Threshold’ would act to reduce the relative R&D Tax saving for companies spending a lower proportion of their total business expenditure on R&D. During the consultation, the Intensity Threshold was identified as a measure that may cause unequitable outcomes, such as providing a lower R&D incentive to companies with large cost bases such as Australian manufacturers.

Since the introduction of the R&D Tax Incentive in FY12, there have been a number of proposed and implemented changes, including:

  • A cap on the amount of eligible expenditure by very large claimants;
  • Reductions to the rate of R&D Tax Offsets;
  • The recent package of proposed reforms R&D Offset calculations including the intensity threshold for claimants of the Non-Refundable Offset, and an annual cap on the amount of Refundable Offset entitlement;

As reported in the media, some argue that there have also been changes in the way R&D Claims are assessed during compliance reviews, and there have been a number of high profile claims found to be ineligible.

Ai Group has called on the government to commit to “much needed” stability for the R&D Tax Incentive, and to maintain a strong support for co-operative research centres, industry growth centres and broader research funding.

The bill to enact previously proposed R&D Tax Incentive reforms (Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018), did not pass through the Senate last year, and a Senate Economics Legislation Committee recommended in February 2019 that the bill should be deferred from consideration until further analysis of the bill’s impact is undertaken, particularly with respect to concerns around the proposed intensity threshold and refundable offset cap.

Recent media reports have indicated that the Government is still considering proceeding with reform to the R&D Tax Incentive.

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