New Opposition Party Statements on R&D Tax Policy

September 10th, 2020 The R&D Tax Incentive Makes It Through Federal Budget Cuts Unharmed

Labor Innovation Spokesperson Clare O’Neil has this week spoken to InnovationAus about the Opposition’s R&D Tax Incentive Policies.

The article focused particularly on the Government’s proposed reforms to the R&D Tax Incentive, which have been widely condemned by Industry Groups and are subject to a Senate Economics Committee review.

Highlights from Clare O’Neil’s interview included:

  • “The government’s proposal represents very, very significant cuts to the RDTI. That is the very opposite of what you want to do when building for long-term growth in the economy. I’m very, very concerned about that;
  • The R&D tax incentive needs big reform, but I wouldn’t go about it in this way. The government’s approach is a very poorly shrouded attempt to cut R&D funding when what they need to do is rethink how we’re spending that money, and where it’s targeted;
  • Our R&D program is quite unusual in that it is a broad-based tax incentive. As long as you meet the criteria, you basically get the money. Some of the best innovators around the world use much more direct grants to fund R&D;
  • In the long run, that is what I’d like to see more of in the program, the strategic interest of Australia and how that is served by government on R&D.”

Swanson Reed has been critical of the Government’s proposed R&D Reforms and has called on the government to withdraw, or at the very least, defer the commencement of their introduction. In this respect, we thank the Labor party for voicing their concerns on the bill currently before the Senate.

In the interests of balance however, we must highlight a concern around Labor indicating a policy of further substantial changes to the R&D Tax Incentive, potentially in respect of a change to a direct funding “grant” model, rather than a broad-based incentive.

One of the most appealing elements of the R&D Tax Incentive is the availablity of a broad, entitlement-based system such that companies are able to make long-term investment decisions in the expectation that the relevant incentive will be available. Both major parties’ policies impede this objective:

  • The Government’s proposed intensity threshold makes it dificult for a company to determine the rate of the R&D Tax Offset it would receive prior to the end of the income year that the R&D expenditure was incurred;
  • If the Opposition’s proposal was to skew benefit out of the R&D Tax Incentive to a programme of grants, companies do not have a certain, entitlement-based system, as their benefit would be subject to a potentially elongated approval process;

Furthermore, both parties’ proposals of making signifcant changes to the R&D Tax Incentive erode its effectiveness, since international empirical research has shown that R&D Tax Incentives are most successful in achieving their policy objectives when they are not subject to constant change.

We call on both sides of politics to commit to a stable R&D Tax Incentive and cease the persistent actual and proposed legislative changes.

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