Another review of the R&D tax scheme


Denham Sadler
National Affairs Editor

The government has launched another review of the research and development tax incentive, this time looking at improving “customer experience” and the controversial compliance activities.

The department is now looking for feedback on the experience of interacting with the research and development tax incentive (RDTI) scheme, including through the use of tax consultants, as well as the efficiency of the current registration process, the guidance materials and difficulties with compliance activities.

The Industry department launched an online survey which is open until 11 October, one day before a Senate committee is expected to deliver its verdict on legislation which effectively makes a $1.8 billion cut to the popular scheme.

“Our department is working on a number of reforms to improve your experience when participating in the program. We would like to understand your current experience in engaging with the RDTI to inform future program improvements,” the Industry department said.

Parliament House
Big plans: Another review of the RDTI, this time looking at customer experience

“Your responses will help us to target specific areas for improvement to ensure the RDTI is accessible to companies who are doing eligible R&D. This will allow us to improve how we administer the program and make doing business with the government easier for you.”

The review is not covering any aspect of the legislation currently before Parliament, but rather how the scheme is being administered by the department.

The online survey includes questions on applicants’ experiences with consultants, how straightforward the application process is, their satisfaction with the responsiveness of program staff to questions, how long the registration process takes, and various issues around the compliance checks.

StartupAUS chief executive Alex McCauley said it’s crucial that registering for the RDTI and working with the department is as seamless as possible.

“Process is important and giving companies a clear understanding of how to apply is obviously critical to helping the scheme be effective. But making sure the right kinds of activities are covered as R&D is really a first step in ensuring the program has the sort of impact we need,” Mr McCauley told InnovationAus.

It’s one of many recent reviews and inquiries into the RDTI, UTS Innovation Council chair Professor Roy Green said.

“This latest review reminds us of Machiavelli’s observation that bringing about change is hard because all those adversely affected will raise their voices whereas those likely to benefit don’t realise it yet,” Professor Green told InnovationAus.

“However, in this case almost everyone is unhappy with the proposed change because it ultimately means less funding to go round, with no compensating expenditure elsewhere.”

Most of the recent inquiries into the RDTI have centred around the Coalition’s planned reforms to the scheme, with legislation currently before Parliament.

The changes include the introduction of a $4 million cap for smaller firms and a new “intensity measure” to calculate the size of the offset for larger companies. Across two senate inquiries, numerous submissions have raised significant concerns with these changes and the potential for them to lead to companies moving their R&D activities offshore.

The committee had been slated to deliver its report on the bill earlier this year, with the government planning to pass the legislation before the May budget. But with the budget delayed due to COVID-19, the inquiry was delayed multiple times.

It will now not be handing down its report until after the federal budget next week.

Small Business Ombudsman Kate Carnell also late last year delivered a report late last year that was highly critical of the department’s administration of the RDTI. It found that the untimely and inconsistent manner, in which the scheme has been applied as had a “devastating impact” on many of the companies it was meant to help.

The ombudsman called for clearer guidance material, for compliance audits to be conducted as close as possible to the first year of registration and for assistance to be given to companies looking to find professional and responsible R&D consultants.

The government has in recent years significantly increased the number of compliance checks on companies accessing the RDTI, with about $200 million clawed back in 2017-18, nearly double that clawed back in the previous year.

Concerns have been raised about these checks being costly and time-intensive for early-stage companies and being conducted several years after the claim was lodged.

Do you know more? Contact James Riley via Email.

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