Australian R&D Spend is Decreasing for the First Time in Decades

September 26th, 2017 manufacturing

The Australian Bureau of Statistics has found that company expenditure on research and development has declined by 12 percent between 2013-14 and 2015-16. This is close to dipping below 1 percent of GDP, or $16.6 billion. Although manufacturing remained the largest spender of R&D, R&D spending in the mining and manufacturing industries was down. Mining decreased by 34 percent ($954 million) while manufacturing was down 19 percent ($936 million).

The R&D tax incentive is expected to cost the government around $3.5 billion in 2017-18. Bill Ferris, Innovation and Science Australia chairman will provide policy recommendations for innovation in three weeks time. This could include detrimental changes to the R&D tax incentive based on suggestions that were proposed previously by Ferris, along with Alan Finkel and John Fraser in 2016, known as the ‘three F’ review. Changes may include a $2 million cap on refunds and a 20 percent premium for university and public research claims.

David Gelb from KPMG says that “The ABS data may well be a portent for further erosion in our performance this year and perhaps a fall below 1 percent of GDP for the first time in decades.” He added that “While this downward trend would typically inspire additional government support for R&D, the opposite scenario is evident.”

The R&D tax incentive provides a 43.5% cash rebate for businesses with revenues under $20 million and a 38.5% non-refundable tax offset for those over $20 million. If your business is interested in claiming the R&D tax incentive, Swanson Reed R&D Tax Advisors can guide you through the process.

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