Growing calls for early R&D tax rebates

Denham Sadler
National Affairs Editor

The controversial proposed changes to the R&D tax incentive are now unlikely to pass this year, as the tech sector called for the changes to be scrapped and for rebates to be paid early to help companies survive the economic turmoil.

The changes to the research and development tax incentive (RDTI) is currently the subject of a senate inquiry. The government originally planned to pass the legislation before the end of the financial year and apply the changes retrospectively for the 2019-20 financial year.

But with the ongoing health crisis and the likelihood of Parliament not sitting again in anything like a normal productive capacity, it is now unlikely that the legislation will be debated or passed this year.

While the changes have understandably fallen off the government’s radar, the RDTI is now more important than ever for early-stage tech firms that will struggle to survive this year.

Daniel Petre
Daniel Petre: A quick and easy way to protect Aussie tech firms

The Senate committee tasked with scrutinising the legislation is also currently working out how it will deal with the bill, with initial plans to hold public hearings digitally and a potentially postponement in the future.

Amidst the uncertainty, a petition launched by Catapult executive chairman Adir Shiffman calling on the Coalition to postpone the changes to the RDTI, halt ATO claw-backs and to fast-track rebates for smaller firms has now attracted more than 1500 signatures.

The campaign has been backed by some of the biggest names in the Australian tech sector, including Atlassian co-founder Scott Farquhar, Canva co-founder Melanie Perkins and AirTree Ventures founder Daniel Petre.

According to the campaign, there is now an “extreme and unprecedented new level of urgency required to preserve the financial viability of Australia’s high-growth technology industry”.

It calls on the government to suspend the senate inquiry into the RDTI changes for at least six months and introduce a six-month moratorium on tax office claw-backs against recipients for the scheme.

The campaign also wants the government to consider allowing companies with turnover of less than $20 million to lodge early claims for the 2019-20 financial year that are equal to the previous year.

InnovationAus understands this is not something the government is considering as part of any further economic stimulus packages.

This would be an easy and cheap way for the federal government to help startups survive the growing health and economic crisis, Mr Petre said.

“Most startups aren’t cash-flow positive, and overnight you’ll see a bunch of good businesses just lose 40-50 per cent of demand. They can’t cut costs fast enough to get cash-flow, and we’re going to see massive failure rates,” Mr Petre told InnovationAus.

“The way the government can help without putting any net new money is to just let people use the incentive early, and give them a sense of the next claim being paid in line with the current claim early in the next financial year.

“In this low interest rate environment, the net cost of this to the government is near-zero. It has to be one of the best ways to help,” Mr Petre said.

“They’ll provide enough money to maybe weather the storm. It seems to be one of the most obvious things to do. R&D is a cheap and easy way to provide some benefit.”

The R&D legislation has understandably fallen off the government’s radar in recent weeks, and it is unlikely to be seen in Parliament again this year.

The Senate committee was forced to cancel a planned public hearing last week due to the coronavirus, and is currently debating whether to go ahead with one scheduled in Sydney next week.

The committee is “examining the potential of conducting some hearings via teleconference and will be in contact with relevant stakeholders”.

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