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Board of Taxation Review of the R&D Tax Incentive Recommends No Major Changes

In the previous federal budget handed down in May 2021, the government announced that the Board of Taxation (Board) would undertake a review to evaluate the dual‑agency administration model for the Research and Development Tax Incentive (R&DTI).

The Board was requested to evaluate the R&DTI dual agency administration model, with a view to identifying opportunities to reduce duplication between the two administrators, simplify administrative processes, or otherwise reduce the compliance costs for applicants.

Swanson Reed participated in the consultation during the review process and noted that any changes proposed should be minor since:

• The past 5 years have already been a tumultuous period in the history of the R&DTI with many actual and proposed changes in law and administrative operation of the programme;
• Companies will already be adapting to changes in FY22 arising from the measures announced in the previous 2020 budget, including the intensity threshold and clawback issues;
• New administrative and reporting requirements for FY21 (specifically, changes to the registration application process) had recently been announced in the week leading up to the 2021 budget;
• A general fatigue of reviews and proposed changes lingered over the programme, and everyone was craving stability.

On 29 March 2022, the government announced the publication of the Review Report. The press release from Michael Sukkar (assistant treasurer) noted that:

• “The Government commissioned the Review of Research and Development Tax Incentive (R&DTI) Dual Agency Administration Model to ensure the administrative framework – shared between the ATO and Industry Innovation and Science Australia – avoids duplication and supports a streamlined experience for taxpayers. Smooth administration is essential to realise the benefits of the Government’s $2 billion investment in the R&DTI in the 2020‑21 Budget;
• Reports indicate that current settings are working well. While there are pragmatic suggestions for further improvements in processes, the ATO and other relevant regulators are working together to administer the programs efficiently and collaboratively with affected stakeholders.”

The report did note the following with respect to application of the programme to software, widely discussed in the media:

• “The Board acknowledges the challenges faced by those companies and agrees that with the fast pace advances to software development, it is important that improvements are made to the RDTI administration model to ensure that there is a path to participation for companies in the software industry.”

Whilst administration of a complex programme such as the R&DTI will never be easy or perfect, we believe that not undertaking major changes to the programme at this time is the right outcome.