Industry Minister comments and Government R&D Policy leading into budget (May 2024)

May 13th, 2024

May 2023 will mark the Labor government’s third budget in this term.
 
Industry Minister Ed Husic has not seemed to make any significant comments about the R&D Tax Incentive programme this year, and announcements so far have included:
  • “Health Research for a Future Made in Australia” package which has a total investment of $1.89 billion;
  • Boosts for skills and training;
  • Investments in quantum computing;
  • Rollout of The national reconstruction fund;
 
The last R&D Tax Specific announcement, seemed to be February 2024 (with release of the Science, Research and Innovation (SRI) Budget Table) which noted:
  • The Government is investing more in research and development with $12.6 billion being injected to support Australian know-how this year.  An estimated increase of 2.7 per cent compared with last year;
  • This investment includes $9.2 billion in direct support for R&D including support for institutions such as the Commonwealth Scientific and Industrial Research Organisation (CSIRO), as well as $3.4 billion for businesses undertaking research through the Research and Development Tax Incentive (R&DTI);
  • This announcement also included a direct quote from the minister:
    • “After a decade of going backwards, today’s data shows green shoots are finally emerging in terms of investment into research and development. While this will be heartening news for our R&D community, we know the hard work has only just begun. Strong R&D investment is crucial to a modern economy because great ideas create great products and secure jobs. Our Future Made in Australia plan is all about leveraging every opportunity to grow our industrial capabilities, linking up our research and development efforts with initiatives like our $15 billion National Reconstruction Fund and our $392m Industry Growth Program.”
Leading into budget time, whether the R&D Tax Incentive is effective, or should be tinkered with is often raised by some in the media, politics or academia.
 
Again this year, there have been calls from some sectors to make significant changes to the R&D Tax Incentive (including changing from a broad, market based, self assessment programme to a grant based system which is assessed based on government identified areas of strategic priority). We believe any such change would be a mistake and undermine business confidence and empowerment to make timely and significant investment decisions.

As noted in our previous updates, we believe that a strong, stable and certain R&D Tax Incentive is key to maintaining business confidence to undertake long term investments in R&D. 
 
An article published by the AFR in late March 2023 (leading into last year’s budget) included comments from Industry Minister Ed Husic and quotes Mr Husic as stating:
 
  • ‘improved measures to incentivise R&D spending are under consideration for the May budget, but that no changes to existing tax incentives are planned, and that nothing will happen without industry consultation’
 
Whilst the past 12 months has again been a challenging period for Start Ups in Australia, any negative issues are largely related to capital markets and interest rates being normalised, and are NOT a direct failure of innovation policy.

Swanson Reed agreed with Mr Husic’s indicated approach last year that no changes to R&D Tax Incentives (or other innovation incentives) are required at this time for a number of reasons. We also note that to our knowledge, there has not been any material industry consultation on changing the R&D Tax Incentive.

Please get in touch with our office if you require assistance.

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