From 1st July 2011, the Australian Government’s R&D Tax Incentive replaced the previous R&D Tax Concession.
In the 2009 budget, the government announced that it intended to introduce a new R&D tax offset to replace the existing 125% R&D Tax Concession and rebate offset, the 175% premium concession and the 175% international concession. This legislation was passed by the Senate in August 2011, with the R&D Tax Incentive commencing from 1 July 2011
The R&D Tax Incentive is jointly administered by AusIndustry (on behalf of Innovation Australia) and the Australian Taxation Office (ATO).
MJA can help you obtain optimal benefits from the new R&D Tax Incentive, and satisfy the associated compliance requirements. read more
Sometimes it feels good to call a spade a shovel. And so it is with yesterday’s release by the Federal Government of draft legislation to “better target access” to the R&D Tax Incentive. According to the Explanatory Memorandum, this is done by denying access to those entities less likely to engage in additional R&D in response to Government incentives i.e. really, really big companies. It is fair to say that the use of the ‘targeting access’ term is an example of spin rivalling Shane Warne in his pomp.
In short, the amendment prevents an entity from claiming the non-refundable R&D tax offset if its assessable income, when aggregated with that of its affiliates and its affiliated and connected entities, is greater than $20 billion. Affected entities will be able to treat the R&D expenditure for tax purposes in the same way as other expenditure, for example, as a deduction. The legislation doesn’t detail what is required of this new third tier of claimants in securing the revised treatment in terms of registration, R&D tax schedules and supporting documentation.
However, not one dollar of the saved tax revenue is being redistributed to those companies still eligible for the Incentive. As has always been the case, your R&D tax claim is totally determined by what you spend. The size of your claim is completely indifferent to whether a global manufacturing transnational makes a claim or whether the biotech operating around the corner applies for an R&D refund. Shrinking access doesn’t equate to better targeted access last time we looked.
In terms of the savings associated with this amendment, the Government hasn’t released any information regarding the amount expected to be saved, the number of businesses likely to be affected or evidence that the R&D tax programs have had a lower impact on R&D spending patterns for the excluded company groups than has been the case with other firms. The basis on which the amendment is being put forward can only be accepted as a matter of faith rather than fact.
Further, the Explanatory Memorandum says the savings are in part earmarked to fund a new Government initiative, ‘A Plan for Australian Jobs’ but accompanying legislation for this plan remains to be released.
Our last MJA Update set out the concerns of removing organisations representing some 20% of our annual BERD spend from the Incentive, Australia’s flagship innovation support program. To date, the concerns raised by the Opposition and the Greens, among others, have not been quelled. The Government faces a true challenge to see this legislation pass by 28 June when Parliament rises.
Submissions to the Treasury close in 8 working days on Monday, 20 May.
Should you wish to discuss this matter any further, please do not hesitate to contact Kris Gale directly on (02) 9810 7211.