Denham Sadler
December 17, 2018

Labor to 'preserve' R&D tax scheme

Policy

Labor to 'preserve' R&D tax scheme

Kim Carr: The R&D tax incentive central to Labor plans to boost research spending

The federal opposition has pledged to “preserve” the research and development tax incentive after accusing the government of “wrecking” the popular scheme.

At the Labor Party’s national conference in Adelaide, the Opposition outlined a significant focus on technology and innovation in its draft platform, even unveiling a new “innovation agenda”.

Included in the draft platform is a commitment to “preserve” the RDTI, potentially signalling that the Opposition will not be supported by the federal government’s controversial cuts to the popular scheme.

“As part of our goal to devote 3 percent of GDP to research and development by the end of the next decade, Labor will preserve the Research and Development Tax Incentive, to drive investment in innovation through the tax system,” Labor’s draft platform said.

“This is critical to Australia’s ability to remain globally competitive by encouraging firms to develop their ideas in this country,” it said.

Shadow industry minister Kim Carr said this is a “statement of direction and intent”, with Labor to formulate its specific policy following further senate inquiry hearings early next year.

“The research and development tax incentive is the principal policy mechanism to stimulate business research and development across industry. Labor is committed to lifting R&D investment,” Senator Carr told InnovationAus.com.

“We want it to be an effective incentive. It must be financially sustainable in the overall budget sense, but it also needs to work.”

“The Liberals are currently wrecking the incentive. Business R&D is falling, government support for R&D is falling. The senate inquiry reviewing the legislation heard complaint after complaint from manufacturers, startups, the minerals sector and others about the complexity and uncertainty generated by government’s proposed changes.”

As outlined in this year’s federal budget, the government has proposed a $2.4 billion cut to the scheme, including a $4 million cap on annual cash refunds for companies with annual turnovers of less than $20 million.

The proposed changes have been slammed by the tech sector, with concerns particularly on their impact on software firms. In its annual report on the sector, StartupAus said the planned changes to the scheme present a “critical risk” to Australian startups, and could lead to the collapse of many local companies.

“This is life or death for some businesses, and it could be life or death for the sector. The ramifications are spreading to companies across the sector and driving down the value of the RDTI for the sector,” StartupAus chief Alex McCauley said.

“It could really undermine the most important bit of government support for the sector, and slow down the growth of the sector dramatically.”

Labor also flagged that it may introduce new measures to the RDTI to incentivise private-public collaboration.

“Labor will develop measures to improve and complement the Research and Development Tax Incentive that will increase collaboration between universities, publicly-funded research agencies and industry, as well as increasing co-investment in innovative manufacturing,” it said.

The draft platform includes a section dedicated to “innovation and the economy of the future”, with a pledge to put “innovation, science and research at the heart of industry policy” if Labor wins next year’s federal election.

“We must foster a culture of entrepreneurialism across the economy, from startups to established businesses and within the public sector. Labor will transform the Australian economy through science and innovation,” the draft platform said.

“Our innovation agenda can re-tool Australia’s industries, re-skill our people and build a new economy based on the latest technologies and advanced manufacturing.”

New policies the opposition is considering include the establishment of an advisory body on entrepreneurial issues that would work closely with key ministers, “reflecting the importance of the startup sector to the broader economy”.

Labor would also look to develop and implement a national STEM strategy focusing on the “national advancement and jobs growth across all existing and future industries” if it takes government next year.

It would also move to establish an independent Australian Skills Authority in legislation featuring representatives from government, unions and employers to project future skills shortages and ways to address this.

At his opening address to the conference, opposition leader Bill Shorten said Labor would provide a government for all.

“If my team and I have the privilege to form the next government of Australia, we understand that our job means representing everybody: small business owners, farmers, startups,” Mr Shorten said.

Mr Shorten said that Labor would “come down like a ton of bricks” on companies abusing work visas to “merely avoid employing local workers and paying fair wages”, and would establish the Just Transition Authority that would assist workers and communities impacted by significant technological changes.

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