R&D tax $20 billion turnover

November 6th, 2013

As part of the Government’s ongoing commitment to restore simplicity and fairness to the Australian tax system, today, Treasurer Joe Hockey announced the re-tabling of many bills that were introduced by the previous parliament.

Of the 92 unlegislated tax and superannuation changes, the Government will proceed with 18 initiatives, including a bill that will deny access to the R&D tax $20 billion turnover companies.  The Government has announced that this measure alone will raise $1 billion in revenue.

The Government intends to pass the R&D bill in both houses by 1 July 2014, and prior to the election of the new Senate that will include mining magnate, Clive Palmer and Senators from the Palmer United Party (PUP) alliance.  Mr Palmer has previously voiced concern over the R&D tax cuts stating they will cause additional damage to the already volatile mining industry. As such, the Government may find it increasingly difficult to pass the legislation after 1 July, 2014 if it is unable pass it in the currently elected Senate.

The Government has not completely rejected the Quarterly Credits scheme. However, if it proceeds, it will likely be in a different format. A review will be conducted to determine if there is any “compelling reason” to proceed with the scheme. The review will likely form a small part of the Coalition’s taxation White Paper.

The White Paper will aim to give broader consideration to the effectiveness of existing taxation incentives for innovation and industry funded research.  Stakeholders will have an opportunity to respond to the White Paper and make comments on the ‘Quarterly Credits’ concept and new concepts such as ‘Patent Box’.

It is important to note that while some companies may be disappointed at today’s announcement, the Government has reaffirmed its commitment to  place an increased emphasis on the importance of commercial R&D in Australia. The Coalition’s Policy to Boost the Competitiveness of Australian Manufacturing will include a push for companies to make profits from their patents and other IP.  These concepts will be explored further in the coming months.