James Riley
December 1, 2015

Business readies for R&D tax fight

Business readies for R&D tax fight

Nicola Purser: Reckons government should avoid trying to pick winners

The business sector is preparing to fight calls for an overhaul of Australia’s R&D tax incentive scheme, arguing government has no business trying to “pick winners” when it comes to innovation.

The academic community has been pushing for an R&D tax revamp, suggesting the $3 billion undirected subsidy should be better targeted, and in particular should be focused on small businesses.

The Australian Council of Learned Academies’ (ACOLA) last week released a report that also suggested further tax concessions should be used to encourage small business to become involved in the translation – to commercial return – of public sector research.

Savings generated from a more targeted R&D tax incentive could then be used to fund support for business innovation through greater use of direct measures such as grants, loans and procurement contracts.

“The [report] has found that Australia is overly reliant on indirect support for business R&D through the R&D tax incentive,” ACOLA says.

Broadly, the academics want a more targeted approach to R&D tax incentives that focus squarely on smaller companies and the expense of the big end of town.

The report also highlights the need for a well-articulated national strategy for innovation, and the creation of an independent agency to manage the strategy.

The ACOLA report, which examined the innovation strategies of 14 nations including Finland, Sweden, Germany, Israel, the US and UK, was launched at Parliament House by outgoing Chief Scientist Prof Ian Chubb.

But the proposals for a winding back of the R&D tax arrangements for business in favour of a system of grants drew immediate criticism from Business Council of Australia president Catherine Livingstone.

Accounting giant BDO’s research and development partner Nicola Purser says the Australian Government is putting academic research ahead of critical industry insights in developing changes to the R&D tax incentive scheme.

Noting a hardening rhetoric on R&D tax changes, Ms Purser said the government had not yet completed its own survey of companies that use the R&D tax incentive – a survey process that had been put in place as part of the Re:Think Tax White Paper process.

“It is disconcerting that the Australian Government is planning to announce its ‘revamp’ of the R&D Tax Incentive prior to finalising this survey and gathering the insights from business, particularly given the ACOLA report itself highlights the need for greater collaboration with the business community,” Ms Purser said.

“With innovation such a critical component of Australia’s economic future, jumping the gun on innovation policy without incorporating commercial insights is incredibly inept,” she said.

“In terms of specific measures, I would urge the Australian Government to consider more carefully the critical factors of expediency and promptness in commercial R&D, factors often misunderstood by academia and the public sector.

Ms Purser said any move to a system of grants and loans could be cumbersome, untimely and inflexible.

“Likewise, in response to Australia’s Chief Scientist Ian Chubb’s recent comments suggesting the public sector takes a role in picking winners, I would counter that not only have governments proven notoriously bad at picking winners, this is counterproductive to the spirit of innovation and exposing new ideas to the open market to determine which are successful,” she said.

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