Clare O’Neil on the R&D tax changes

Denham Sadler
Senior Reporter

The federal government is “selling out the next generation of Australians” with its planned cuts to the research and development tax incentive and should instead look towards more direct funding, according to shadow innovation minister Clare O’Neil.

The Senate Economics Legislation Committee is currently scrutinising the government’s reforms to the research and development tax incentive (RDTI), which amount to a $1.8 billion cut to the popular scheme.

The changes include the introduction of a $4 million cap for smaller companies and a new “intensity measure” to calculate the size of the offset for larger companies.

The committee had been set to report back last month but has now been pushed back until after the federal budget in early October.

Clare O'Neil
Clare O’Neil” The cuts to the RDTI are no way to bolster R&D investment in Australia

While the Opposition is yet to finalise its position on the legislation, a number of shadow ministers have been critical of aspects of the changes, and Labor is expected to move amendments in the Senate if government goes ahead with the plan.

Now Ms O’Neil has come out strongly against the reforms, labelling them a misguided cost-cutting exercise rather than an attempt to improve R&D in Australia.

“The government’s proposal represents very, very significant cuts to the RDTI. That is the very opposite of what you want to do when building for long-term growth in the economy. I’m very, very concerned about that,” Ms O’Neil told InnovationAus.

“The R&D tax incentive needs big reform, but I wouldn’t go about it in this way. The government’s approach is a very poorly shrouded attempt to cut R&D funding when what they need to do is rethink how we’re spending that money, and where it’s targeted.

“This is cutting off the pipeline for future growth and selling out the next generation of Australians. It’s saying we care more about the fiscal bottom line now than having kids in the jobs of the future.”

The government should be looking towards more direct funding of R&D in-line with some of the best-performing countries in the world, Ms O’Neil said.

“Our R&D program is quite unusual in that it is a broad-based tax incentive. As long as you meet the criteria you basically get the money. Some of the best innovators around the world use much more direct grants to fund R&D,” she said.

“In the long run that is what I’d like to see more of in the program, the strategic interest of Australia and how that is served by government on R&D.”

Labor has also been critical of the government’s plan to apply the changes to the scheme, which will likely reduce the size of claims for many companies, retrospectively to the 2019-20 financial year.

The Senate committee received about 100 submissions during its inquiry, with virtually all of them critical of the planned changes. The committee’s solidary public hearing also saw a number of industry groups flag concerns with the legislation, saying it would lead to companies relocating offshore.

The committee will now be tabling its report on 12 October, a week after the federal budget is set to be delivered.

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