Federal Budget in March 2022 – R&D Tax Incentive is Again Not Likely to be a Focus…(Hopefully)

March 14th, 2022

The 2022 Federal Budget is due to be held in March 2022, which is earlier than the usual May timing, due to this year’s election.

In the belated federal budget handed down in October 2020 (delayed due to COVID), reforms to the R&D Tax Incentive were a centrepiece.

Leading up to the 2020 budget, the government was proposing substantial changes to the R&D Tax Incentive which were aimed at reducing the cost of the programme, but that had not yet been legislated as law.

When the 2020 budget was announced, the government largely backed away from the unworkable proposed changes in its R&D Tax Incentive reform bill that was before the senate, and presented additional R&D Tax benefits not previously anticipated.

These reforms were widely welcomed by industry and subsequently passed as law within Treasury Laws Amendment (A Tax Plan For The COVID-19 Economic Recovery) Bill 2020.

The May 2021 budget did not present any changes to the R&D Tax Incentive, given that the major reforms announced in the 2020 budget had not yet commenced.

The feeling leading into the 2022 Federal Budget seems to indicate that Australian businesses are again, for the second budget in a row, not bracing for bad news in respect of the R&D Tax Incentive programme.

There have been little media announcements indicating potential changes to the R&D Tax Incentive in the 2022 Budget, and it would be unlikely for any to be proposed so soon after the changes announced in 2020. This is a good thing, and we call on both sides of politics, regardless of who wins the election, to maintain stability in the programme, which would increase its effectiveness and give companies confidence to make long term investment decisions.

It will be interesting to watch whether there may be any other measures announced in the budget that may indirectly impact on companies’ R&D claims such as:

  • Any potential changes to company tax rates;
  • Measures hinted as possible by the media in respect of company investment in digital infrastructure;
  • Measures to address skills constraints and access to talent.

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