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New OECD report notes Australia’s R&D tax incentives among world’s most generous

The latest annual report from the OECD has noted that Australia’s R&D tax incentives are among the most generous in the developed world.

An article by the Accounting Times has covered the OECD report well and detailed ket points from the report including:

• Australia was one of a handful of countries that provided two-thirds or more of its government support for business R&D through tax incentives;
• Generous R&D tax relief provisions compensate for relatively low levels of support through direct funding, such as R&D grants and procurement of R&D services;
• They make eligible investments financially advantageous to firms, driving growth, but reduce governments’ direct tax intake;
• The generous incentives on offer partially offset Australia’s high corporate tax rate. The OECD’s report found Australian companies paid an effective average tax rate of 28.5 per cent last year.

In the upcoming review of Australia’s R&D system, the mechanism for self assessment based R&D Tax Incentives (as distinct from alternative funding models such as grants) may become a discussion point.

Again recently, 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.

Whilst the cost of the programme is growing, and must understandably be subject to scrutiny to ensure taxpayer value, Swanson Reed will continue to call for stability in the programme as the cornerstone for business investment in R&D.

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