Home » News » Potential Impact of Incoming US Government on Australian Business and R&D Tax Policy
January 20th, 2025
Following the US election in 2024, a new Government will be installed in the US during January 2025.
The impact of the new Trump Government on US R&D and tax policy is not immediately clear, and it may impact some industries differently to others. Possible impacts may include:
- there will be a clear push to favor US based manufacturing via tax and tariff measures;
- media commentary notes that the incoming US president is expected to reduce support for research on the environment and infectious diseases, but could increase support for work in artificial intelligence, quantum research and space exploration;
- there MAY be beneficial measures to US R&D Tax Incentives by delay of the introduction of mandatory capitalization of R&D costs through 2025 for US R&D expenditures;
- it may have some impact on defence technology spending;
- there will probably be a push to reduce US Government expenditure and instead have resources redirected to private and public businesses.
These measures may indirectly impact Australian business and R&D entities in a number of ways, given that:
- the US is an enormous market for Australian businesses seeking to enter or develop their products and services for offering into;
- particularly high tech Australian business compete with US based businesses for talent and resources;
- Australian based business source capital from US investors;
- businesses with central management in Australia consider decisions on whether to relocate R&D or manufacturing functions to the US, or to redomicile to the US altogether.
Anecdotally, over the recent months we have have noted a growing number of Australian businesses seeking to increase their exposure to the US (via focusing marketing efforts or establishing US R&D or operational presence), due to an expectation that this may drive future growth, and also due to challenges in operating in Australia such as availability of skilled resources in Australia.
Noting the well publicised flatlining of Australian R&D Expenditure, Australian business relocating to the US presents an additional challenge to reversing the trend.
In a year where there is a review of
Australia’s R&D System and a Federal Election due, it will be important for a bi-partisan approach to creating a positive and stable environment to inspire Australian business confidence to maintain and grow their local R&D Expenditure. This should include:
- A broad based, stable and generous R&D Tax Incentive available to all business who conduct activity in accordance with the legislated criteria;
- Very well and narrowly targeted grant type funding for businesses identified as having strategically import projects;
- Policies that provide business with access to suitable skilled workers;
- Policies to facilitate partnership with the US to provide Australian business market access opportunities without needing to relocate.
Please get in touch with our office if you require assistance, would like to speak to someone about a potential claim, or check out our website for more information.