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Media Coverage of Change in Government Implications for the R&D Tax Incentive

Going into the federal election held on 21 May 2022, it was not expected that the R&D Tax Incentive was to be impacted (in the short term at least), and there were not any announcements during the campaign that have been R&D tax specific.

This was so, since recent legislative amendments to the R&D Tax Incentive had only recently commenced after the October 2020 bi-partisan enactment of the underlying law, and it would be unlikely for further change to happen so soon.

The election was won by Labor, who have taken government after approximately a decade of a Coalition government.

The Coalition government was in power during what we consider to be the most challenging period in R&D tax history (the compliance crackdown phase between 2017 to 2019, during which a number of adverse legislative changes were also proposed to the programme). The Coalition government also had a number of industry ministers, whose responsibilities included oversight of the R&D Tax Incentive.

However, the Coalition government do deserve credit for backing away from controversial amendments proposed to the R&D Tax Incentive. The eventual amendments that passed and commenced for FY22 are far superior, with a stated objective of using the R&D Tax Incentive to assist the country’s economic recovery from COVID.

The R&D Tax Incentive succeeded the previous R&D Tax Concession in FY12 and was originally a Labor Government initiative. We are hopeful (and cautiously optimistic), that the incoming government will look to preserve the programme’s stability and not propose adverse changes to the programme in the near term.

Some highlights of election media coverage during the week relevant to the R&D Tax Incentive include the following:

• InnovationAus has detailed Labor’s Ed Husic’s appointment as Industry Minister, along with comments from industry that it’s hoped that the Labor government focuses on the R&D Tax Incentive and addressing the skills gap;
• AusBiotech welcomed the incoming Labor Government and noted that they had previously worked closely with key Labor ministers on issues critical to biotech, including preserving the R&D Tax Incentive;
• An AFR opinion piece authored by Allegra Spender (incoming independent member for Wentworth) noted a need for policies that encourage greater spending on Australian R&D, since:
  • Australia spends less than 2 per cent of GDP on R&D, compared to nearly 5 per cent in South Korea and Israel;
  • Productivity growth has been stagnant for a decade;
  • Technology start-up leaders have given feedback that our regulatory frameworks aren’t fit for purpose.
• AFR coverage noted:
  • Feedback from the tech sector that Government should expand the portfolio of Industry and Innovation, occupied by Ed Husic while in opposition, to create a cabinet position incorporating government services and the digital economy portfolio. The R&D Tax Incentive would be within the scope of this department;
  • Mr Husic has indicated he would look at making the R&D Tax Incentive program more friendly to software-based start-ups.

For more information about the R&D Tax Incentive, visit our website.