Denham Sadler
November 27, 2018

R&D tax senate report delayed

Policy

R&D tax senate report delayed

Jane Hume: Chairing the Senate committee looking at R&D tax changes

The senate committee report on the contentious Research and Development Tax Incentive changes has been delayed and won't be handed down for another three months.

The Economics Legislation Committee has been reviewing the Making Sure Multinationals Pay Their Fair Share of Tax in Australia bill, which includes major changes to the R&D Tax Incentive scheme, since mid-October.

It had originally been scheduled to hand down its report on 3 December during the last sitting week of Parliament, but this date has now been pushed back to 11 February next year.

The Senate committee is chaired by Liberal senator Jane Hume and includes two Labor senators, three Coalition senators and one Greens senator.

The changes were flagged in this year’s budget and unveiled in legislation in July, effectively cutting $2.4 billion from the scheme over four years.

The changes included a $4 million cap on annual cash refunds for companies with annual turnovers of less than $20 million, and a new intensity measure for larger companies.

The senate committee has received numerous submissions on the legislation outlining a series of concerns with the changes, including that they will force companies to conduct research and development offshore and reduce the amount of activity taking place in Australia.

There are also calls for the $2.4 billion in savings to be reinvested through direct grants for the research, science and technology sectors.

The committee has held one public hearing in Canberra earlier this month, where every witness except for departmental staff was critical of the changes.

It was also revealed that the government’s key advisory group for the RDTI, the National Reference Group for the R&D Tax Incentive hasn’t met since March 2017, despite these major changes being rolled out in this time.

At the hearing, RSM Australia’s Stephen Carroll said the changes would “wipe out a bunch of SMEs”.

“There will be a reduction, obviously, in the claims, extra compliance costs, and they will go offshore, without a doubt. It’s that easy for a company. And these are startups can put out an ad and get a tech developer overseas instantly,” Mr Carroll said.

Several other witnesses also raised concerns that the uncertainty and changes surrounding the RDTI could drive companies to relocate overseas, including the Australia Information Industry Association general manager of policy and advocacy Kishwar Rahman.

“Our members are indicating that they are looking offshore for options. New Zealand, Ireland and Singapore are some of the options they’re considering. Members have indicated that, should they continue growing and succeeding in their endeavours to develop software and other products, they will look at offshore options,” Mr Rahman said.

Universities Australia deputy chief executive Anne-Marie Lansdown said the changes to the RDTI will put Australia behind much of the rest of the world.

“If as a country you are not investing in research and development, you are not at the table with the countries that are at the leading edge of research,” Ms Lansdown said.

“It would be reckless in the extreme, just on the basis of our international engagement and collaborations, to reduce our investment in R&D.”

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