Reports That Senate R&D Tax Reform Inquiry Has Been Delayed Again

August 5th, 2020

In December 2019, the government re-introduced a bill to reform the R&D Tax Incentive.

This bill was a slightly modified version of a previous reform bill (Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018), which did not pass through the Senate at that time. A Senate Economics Legislation Committee recommended in February 2019 that the initial bill should be deferred from consideration until further analysis of the bill’s impact was undertaken, particularly with respect to concerns around the proposed intensity threshold and refundable offset cap.

The R&D Tax Reform bill has been uniformly criticised by companies, industry groups and R&D tax professionals, with concerns particularly directed at the “Intensity Threshold” proposal, which would punish companies with large cost bases, such as local manufacturers.

A Senate Economics Legislation committee review was being conducted on the revised bill, with a public hearing occurring on the 29th of June.

InnovationAus has reported today that:

  • The committee had originally been set to report on the bill by April;
  • The committee was expected to report the conclusions of the inquiry this Friday, but this has been pushed back further due to changes in the Parliamentary sitting schedule, with the committee now expected to table its report on the bill by the 24th of August;
  • The government still intends to impose the changes retrospectively to the last financial year (i.e. passed retrospectively and applying from the 1st July 2019 for the FY20 period).

Swanson Reed’s position is that:

  • The current bill to reform the R&D Tax Incentive should be withdrawn altogether due to the seemingly unanimous condemnation of it by all relevant stakeholders;
  • If the bill is passed, that an amendment be made to defer the start date of the bill to be FY21 or FY22, to allow companies sufficient time to attain and understand relevant guidance material on the reform’s implementation.

We call on both sides of government to commit to a stable R&D Tax Incentive, and are of the view that the programme would be most effective in achieving its policy objectives if not subject to further proposed changes.

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