More uncertainty on R&D tax scheme

Denham Sadler
Senior Reporter

Uncertainty still surrounds the research and development tax incentive, with the government committing to reforming the popular scheme but not providing any clarity on how it will go about this.

It comes as the controversial changes to the research and development tax incentive (RDTI), announced in last year’s budget, were removed from the legislation when it was re-introduced to Parliament earlier this month.

The Coalition announced a series of changes to the scheme, which is popular among startups and tech firms, to achieve savings of $2.4 billion.

The changes were eventually included in the Treasury Law Amendments (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) omnibus bill, which was introduced to Parliament in September last year.

The changes included a $4 million cap on annual cash refunds for companies with an annual turnover of $20 million or less, an increase of the refundable tax offset to 13.5 per cent above the company’s tax rate for that year, and the introduction of an “intensity measure” to calculate the refund for larger firms.

But the planned changes to the RDTI were highly controversial across the board, with concerns that it would lead to local companies moving overseas to more favourable conditions, and unfairly impact smaller companies.

A government-led Senate committee eventually recommended that the legislation be put on hold and the government return to the drawing board on the proposed changes, and the bill wasn’t passed before the May election.

The committee specifically called on the government to address whether the changes should be applied retrospectively to small Australian companies, and rethink the “intensity measure.”

The government is yet to confirm how it will proceed with the planned changes, but when the same legislation was re-introduced to Parliament earlier this month in the first sitting week of the new Parliament, the R&D changes were not included.

A spokesperson for assistant treasurer Michael Sukkar said the committee’s report was being considered by the government as a “matter of priority” but did not provide any timeframe or detail on which changes would be pursued.

In a separate statement, Treasurer Josh Frydenberg said the government was committed to going ahead with the contentious changes to the RDTI.

“The government is committed to driving important R&D while also ensuring the program’s integrity. The government is committed to driving important R&D by supporting both small innovative firms and rewarding larger businesses that do more to invest in developing new products, processes and services that help make Australia more competitive and create more jobs,” Mr Frydenberg told

“The Senate Economics Committee found that R&DTI reform is needed and we agreed with the committee’s recommendations regarding technical refinements, and that work is underway.”

The government held an industry roundtable on the RDTI in Canberra on Tuesday, but it’s understood that little clarity was provided.

There have been widespread concerns about these changes and the sharp increase in the number of audits of companies accessing the RDTI. According to documents released under a Freedom of Information Act request, the number of compliance checks in the last year doubled, leading to $200 million being clawed back.

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