Latest R&D Tax Bill – When Being Transparent Is Being As Clear As Mud

November 1, 2018 Kris Gale

On 18 October, the new R&D Tax Bill, Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, was referred to the Senate Economics Legislation Committee (the Committee) for an inquiry.
As part of this inquiry, the Committee was seeking comments on the Bill with public submissions closing on 5 November.  The Committee was then scheduled to report on the inquiry by 3 December.

As outlined in a previous MJA Update, there were some modifications to the original Bill but the principal concerns around the decimation of the Non-Refundable R&D Tax Offset by the introduction of a punitive R&D Intensity test remained and MJA indicated that it would be highlighting this in its next submission.

Unsurprisingly, the word is that few submissions have been rolling in. At the time of writing, only one submission has been lodged. Given the tight turnaround of two and a half weeks, this was to be expected. R&D tax is known for having all the symptoms of submission fatigue and it might be that most are relying on their previous submissions made back in July with respect to the first version of the Bill.

However, there have been a number of disturbing features around the presentation of the submission processes attached to this Bill. The first is that the July submissions were never made public. It is not known how many submissions were made and how many consented to having them made public, let alone their contents. So the modifications that the Government made came about with the doors tightly closed.

What we do know is the modified Bill has a new name about making sure multinationals pay their fair share of tax, yet it packaged up the following issues:

•    R&D tax changes (80% of the Bill)
•    Thin capitalisation
•    Online hotel bookings
•    Removing luxury car tax on re-imported cars refurbished overseas
•    Significant global entity

As Lionel Hutz, the lawyer character from “The Simpsons” once famously remarked, this means that the Bill’s title about multinationals paying a fair tax share is  the worst case of false advertising since the title of the movie, “The Never-Ending Story”.

To compound the confusion, a second Bill was released around the same time entitled Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 which is aimed at re-calibrating the policy settings for foreign investment in certain industries. Many thought that the two Bills were the same and it’s possible that many missed the earlier submission date attached to this other Bill, thinking that their chance to comment on the R&D tax provisions was closed. (Incidentally, a Senate Estimates hearing into this Bill took place yesterday [31 October].)

The good news is that, despite these appallingly obstructionist practices, there is still time to submit on the R&D Tax Bill. At the very least, you may simply wish to resend your original July submission with a covering letter attached. You can do so via this link: https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/TLABMultinationalsTax 

You have until Monday, 5 November. The push will then be on to secure a public hearing into this very troubling piece of legislation.

MJA will keep you fully updated as to all developments and the Bill’s progress.

As always, should you wish to discuss this matter further, please do not hesitate to contact Kris Gale on 02 9810 7211 or email kris.gale@mjassociates.com.au