James Riley
September 3, 2019

Andrews mulls R&D tax changes

R&D Tax

Andrews mulls R&D tax changes

Karen Andrews: Taking a closer look at AusIndustry processes on RDTI

Industry Minister Karen Andrews will seek improvements to the administration of the R&D tax incentive (RDTI) within AusIndustry to give companies greater certainty about the claims they make under the scheme.

Speaking to InnovationAus.com to mark 100 days since her reappointment to the industry portfolio, Mrs Andrews acknowledged the difficulties created by uncertainty about whether work would be approved under the RDTI, particularly among software companies.

But while the department had been tasked with refining the administration of the scheme, Mrs Andrews ruled out issuing any new guidance that would change the established definitions about what constitute R&D under the scheme.

“What I have been clear about is that as much as possible we need to provide a level of certainty. This is particularly important for software companies,” the minister said.

“So I am working very closely with the department and they have been specifically tasked with coming up with ways to improve the administration of the R&D tax incentive, because it is pretty clear that has been one of the issues, that many firms have not been clear about whether their work would be approved under the RDTI or not,” she said. “And we need to make that abundantly clear.”

The popular R&D tax incentive has been a vexed issue for government, which has faced a backlash over its clawback of $200 million from companies in the 2018 financial year.

Small business ombudsman Kate Carnell last week launched an investigation of the Australian Tax Office enforcement of the R&D Tax Incentive program following large numbers of complaints from SMEs about unfair treatment from the ATO and AusIndustry about their claims.

And Tax Commissioner Chris Jordan last week conceded there was a structural problem within the RDTI scheme.

Specifically, he said AusIndustry gives preliminary approval and then the ATO steps in to check the projects – typically at the request of AusIndustry – as the enforcement agency.

Mr Jordan was highly critical of the “industry of advisers” that had grown up around the RDTI, where professional services firms work on a contingency basis, skewing the incentives of the relationship toward risk.

Mrs Andrews would not comment specifically on Mr Jordan’s comments or private sector advisers.

“But it is very important for businesses to get advice and to get the right advice. I am very focused on making sure that AusIndustry is in a position to provide that advice to them and that we provide it with as much certainty as possible, understanding that the research and development is being undertaken in advance of when they first engage with AusIndustry,” she said.

“What we’re looking at is ways to refine our processes, and we will certainly be talking to the sector and seeking their input.

“And I have put the call out: I have said to people give me some examples of processes and where they need refinement to get toward more certainty, and I will work with stakeholders to get that certainty,” Mrs Andrews said.

Australian tech platform Airtasker’s chief executive Tim Fung says the T&D Tax Incentive is one of the most critical support functions provided for small businesses and software startups in Australia. Airtasker had accessed the scheme over several years, but was caught up in the clawback and was asked to repay 100 per cent of the R&D incentives provided over a number of years.

Mr Fung welcomed the attention now being given to the scheme.

“We are pleased that the ombudsman has identified that RDTI is a key issue for the future of the Australian economy and has stepped in to review the way in which the program is being administered,” Mr Fung said.

“Given the importance of the RDTI program and the detrimental impact that the current lack of clarity is causing on small businesses and startups - we believe that even greater attention on this issue is necessary,” he said.

“We are cautiously hopeful that Ausindustry will review the way in which RDTI has been administered and will provide clarity on it's position with respect to supporting the Australian technology industry.”

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