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OECD Figures show Australian R&D Investment Declining Against Peers

August 27th, 2019 proposed change to the R&D Tax Incentive

A report published by The Sydney Morning Herald has detailed how Australia has fallen from 114 to 107 in 2017-18, according to an OECD index of R&D investment by government. The index, measured through purchasing power parity, is expected to drop again if/when a proposed 2019 budget cut to the R&D Tax Incentive of $1.3 billion comes into effect;

The reports of decline come amidst:

  • federal treasurer Josh Frydenberg calling upon business to increase their investment in Australia as a means of boosting productivity and wage growths;
  • proposed cuts to the R&D Tax Incentive potentially being retabled, with Mr Frydenberg seeming to suggest that that the proposed ‘intensity threshold’ mechanism may be reintroduced as a proposed change to the R&D Tax Incentive;
  • The Productivity Commission had recently identified R&D as one of the key reasons for Australia’s “mediocre” productivity level.

The bill to enact previously proposed reforms (Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018), did not pass through the Senate last year, and a Senate Economics Legislation Committee recommended that the bill should be deferred from consideration until further analysis of the bill’s impact is undertaken, particularly with respect to concerns around the proposed intensity threshold and refundable offset cap.

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