Porter ‘open minded’ on software R&D tax

James Riley
Editorial Director

Industry minister Christian Porter says he is open-minded about a separate R&D Tax Incentive scheme for software but will not consider the issue until a Senate committee reports in October.

The Select Committee on Australia as a Technology and Financial Centre recommended that the government consider a separate R&D Tax scheme aimed specifically at software companies in its second interim report released in April.

Mr Porter says he was “very aware” of the views of software companies and their advocates through submissions to the inquiry, and via feedback gathered in workshops conducted between government and the industry in April.

But he won’t look at the issue until the Andrew Bragg-chaired Senate committee delivers its final report in October. In the meantime, new draft guidelines published by AusIndustry would at least provide clarity about how software fits into the current RDTI scheme.

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“I have followed the debate and the arguments, and obviously the eligible R&D [activities are] defined in the legislation,” Mr Porter told InnovationAus.

“The committee that’s considering that has not given their report yet. I am very aware that earlier this year there was a group of stakeholders that went through a collaborative workshop with government and industry to improve the understanding of how software is recognised by R&D tax incentive system at the moment,” he said.

“So that’s produced this new draft about software development activities and how that’s applied [and] that’s available now.

“The second interim report of the committee recommended that we consider a separate specific software tax incentive scheme. The final report of the committee is due out in October, so I’ll look at that then.”

“At least as a first and immediate step, I think clarity around how software fits into the existing R&D system was a sensible thing to do, and was done in a sensible way,” Mr Porter said.

“It made a lot of sense to have that two-way understanding developed between the department and the people who are designing software.”

“I am not closed-minded about some of the submissions that were put to the committee, but I will wait to see what the committee reports.”

Meanwhile, Mr Porter defended the process government had undertaken in relation to potentially establishing a sovereign mRNA vaccine manufacturing capability, saying the technology was new, complex and fast evolving.

While previous Industry minister Karen Andrews had in 2020 committed to a nine-to-12-month process bring an mRNA manufacturing capability onshore, that has now been pushed back.

Government commissioned a $2 million business case study from global consultants McKinsey last December and has been in active discussion with the pharmaceutical companies Moderna and Pfizer – the two companies with existing proprietary IP in the manufacture mRNA vaccine.

Mr Porter said the complexity of the technology – including in deciding what applications it could be applied to – made negotiations about what a taxpayer-supported effort to establish sovereign manufacturing might look like.

“It is very difficult to assess what would be a reasonable ask [of the taxpayer] for a joint-venture or a consortium without knowing everything you can possibly know about worldwide conditions with regards to mRNA,” Mr Porter told InnovationAus.

“I’ve been pretty pleased with the response to market process, and the conversations with Moderna have been very constructive, but there are some pretty difficult decisions to make about how you move forward between the various parties that have expressed interest in establishing a sovereign manufacturing capability in Australia. Because these are exceedingly complex questions.”

“It’s not just about the scalable manufacture of a vaccine for another potential pandemic of similar scale and type to COVID-19,” he said.

“It’s also about how you might apply mRNA technology to seasonal influenza, or how it might be applied to therapeutics [for diseases] like cancer or cardio-vascular. And even now, the international discussion is about seasonally how you might have a one-shot vaccination for COVID-type viruses and influenza viruses.”

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