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Proposed $20B R&D tax exclusions supported

January 24th, 2014

On 5 December 2013 the Senate referred the Tax Laws Amendment (Research and Development) Bill 2013 to the Senate Economics Legislation Committee for inquiry and report.

The Economics Legislative Committee inquiries allow interested parties to submit their views on the proposed changes. The deadline for submitting was 22 January 2014. There was an overwhelming response from the parties who submitted in opposition to the amendment. Swanson Reed stood out for its view that the proposed changes could bring about welcome support for SMEs and a major reduction in government debt.

In the Swanson Reed submission there was a focus on the following key aspects in support of the proposed changes:

• The R&D Tax Incentive is estimated to be over budget by $1.2 billion by 2016-17. To balance out the cost of the program, Australia’s largest 15-20 firms are to be denied access to the tax incentive.

• Excluding the largest companies from claiming is internationally unprecedented however evidence suggests that large firms are most likely to maintain Australian R&D spend.

• SMEs experience greater benefits and increase innovative activities in response to increased government support for R&D and would suffer as a result of cuts to their R&D Tax Incentive entitlements.

Swanson Reed takes the view that the proposed Amendment balances the cost blowout while having the least impact on the economy.

A report of the inquiry findings is expected on 17 March 2014. The proposed Bill will either be passed or referred back to the lower house with amendments by 30 June 2014.