In December 2019 a slightly revised R&D Tax Incentive bill was put through parliament that was already been rejected once by the Senate.
In February 2019, a Senate Economics Legislation Committee reviewed the proposals and concluded that further examination and analysis was needed on the proposed changes, reflecting concerns that the proposed changes would have significant negative impact on the economy. The revised bill is slated to be presented to Senate next week, 10th February 2020.
What’s changed in the RDTI Bill 2019?
The new R&DTI Bill Amendment was read in Parliament on 5th Dec 2019 with only minor changes. It continues to push for significant reduction of rebates paid to both Large and SME companies conducting genuine R&D activities with the clear intent of reducing Treasury outgoings.
Treadstone is concerned that this cornerstone rebate, that has provided companies with tangible incentives to innovate, is now being diluted to the point that both small and large technology businesses will either deliberately outsource jobs to overseas markets or cease to innovate.
Furthermore, the proposed method of calculating “intensity factors” to determine net rebates are open to manipulation and may invite companies to source non-R&D operations from overseas markets.
Ombudsman’s R&D Tax Incentive report shames ATO and AusIndustry
In December 2019, Kate Carnell, Australian Small Businesses and Family Enterprise Ombudsman, presented a critical review of the R&D Tax Incentive administration, both ATO and AusIndustry (see Ombudsman’s report).
“We identified an overall “shift” in the way the R&DTI legislation has been interpreted over the last three to four year; a narrowing of focus leading to a rejection of claims, which in previous years had been regarded as low risk. The way the program has been administered has created uncertainty amongst companies and their advisors and had undermined the policy intent of the R&DTI Legislation.”
Peter Nolle, from Treadstone, stated that, “the reputation of the R&DTI is at its lowest it has been for many years. The number of new applicants has fallen by 16% and business are saying they are better off hiring overseas resources. This is not a good time to introduce further rebate reductions or complexity in an already complex area of tax law”.
Recommended Changes to the R&D Tax Incentive
Counter to the proposed RTDI Bill 2019 Treadstone recommends that both Treasury and the Office of Innovation and Science Australia consider the following proposals that will directly increase expenditure of private businesses through smarter simpler incentives including:
- R&D tax threshold ($20m) be raised in line with current tax rates for SMEs ($50m)
- R&D tax rates for large business remain simple and in line with current rate of 38.5%
- R&D tax rates for SMEs remain unlinked (at 43.5%) rather than delinking at 13.5%
- Administration of the program to focus on education and assistance rather than penalties
- Industry task force be engaged to address uncertainties and provide examples of R&D for software developers
Update: Senate refers Bill off to a comprehensive Senate inquiry.
During the second reading of the R&D tax bill in the Senate, Labor MPs stated that this bill was a concern and have now referred this matter off to a comprehensive Senate inquiry.
About Treadstone R&D Tax Consultants
Treadstone R&D tax consultant have been assisting Australian business with R&D tax services since 2010. As a leading R&D tax service provider we provide a dedicated and efficient review process to evaluate eligibleR&D tax expenses and activities. We provide specialised R&D tax compliance and documentation capture to addresses the needs of both ATO and Ausindustry Audit Compliance. Treastone is a registered tax agent for R&D Tax Incentive.