Australian Companies Increasing Project Investment Based on More Favorable R&D Tax Environment

January 18th, 2021

The Government’s R&D Tax Incentive budget announcement on 6 October 2020 largely backed away from previously proposed and widely condemned retrospective cuts to the programme, and contained some additional R&D Tax benefits not previously anticipated, which are to apply from FY22.

The SMH has this week reported that Australian companies have made substantial increases in their R&D Budgets as a direct result of the government’s R&D Tax Measures passed late last year.

Cochlear and Resmed are quoted by the SMH as having increased their planned investment in Australian R&D. Both companies had lobbied the Government around the importance of a stable R&D Tax Incentive Regime during the passage of previously proposed reforms to the programme.

Australian SME’s may take an example from Cochlear and Resmed in using the R&D Tax Incentive as a means of co-funding their investment in R&D Activity. Those companies who may have been scared off from submitting R&D claims based on the widely reported regulator “crackdown” may also wish to note that the compliance environment has changed in the past 18 months, which has seen:

  • Changes in the regulator’s compliance assessment frameworks;
  • The publishing of additional, clearer guidance;
  • Settlement of a number of disputed R&D Tax Claims in favour of R&D Entities;
  • Exit from the Industry of R&D Tax advisors that had been targeted by regulators for providing poor advice and service.

SMEs who exited the programme, but are still conducting eligible activity may wish to review their current R&D activities in line with current guidelines and regulator expectations.

The SMH Article also included a quote from an AusIndustry Representative noting that, “The department will continue to take a risk-based approach to reviewing applications and may examine registrations to ensure they comply with the eligibility requirements of the program, in line with standard practice.”

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