The Treasurer has entreated all Australians to get behind his “Have A Go” Federal Budget but there wasn’t much by way of news in the area of innovation support. It could be concluded that the Federal Government is coming over all coy about innovation, given the small number of news stories contained in the detailed announcements.
Some Good News
The proposed reduction in the corporate tax rate for businesses with a turnover of less than $2 million from 1 July 2015 means that these companies will see an increase in the permanent tax benefit to 16.5 cents in the dollar when making claims under the 45% Refundable R&D Tax Offset. For companies such as start-ups in tax loss, they will be able to access cash refunds at the rate of 46.5 cents in the dollar. Coupled with the announcement around small businesses being able to access immediate tax deductions for asset purchases up to $20,000, this represents good news for Australia’s small innovators.
But, as always, there was…
Some Not So Good News
Embedded in the Budget Papers (page 29) is an outlining of the $100 million R&D expenditure cap that was introduced last February. In describing the general benefits available under the R&D Tax Incentive (the incentive), the following appears:
“Under the R&D tax incentive, companies can claim a refundable tax offset of 43.5 per cent if their turnover is less than $20 million or a non-refundable tax offset of 38.5 per cent.”
The proposed Bill to reduce the head rates of the Incentive to 43.5 and 38.5% failed to pass Parliament earlier this year. However, the Government has subsequently indicated an intention to reduce the rates at some stage without providing a timetable. And last night’s Budget continued to withhold any details. Why so coy, Joe? MJA will be making a submission to the Treasurer’s Tax Discussion Paper process (due 1 June) and will seek to get some light shone on this and other areas surrounding the current design and performance of the Incentive. The thrust of what will be in our submission will be the subject of an upcoming MJA Update.
When allied to announced reductions in funding areas such as the Entrepreneurs Infrastructure Program and the Co-operative Research Centres Program, the ambivalence shown to the Incentive is not a good news story for Australian innovation.
Are we the first to ever say “Watch this space!’?
Should you wish to discuss this matter further, please do not hesitate to contact Kris Gale directly on (02) 9810 7211 or email email@example.com
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