R&D Tax Bill Presented Today

December 5, 2019 Kris Gale

The Federal Government has introduced the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 [https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;page=0;query=BillId:r6473%20Recstruct:billhome] into Parliament today. The Bill seeks to introduce amendments to the R&D Tax Incentive (the Incentive) effective from 1 July 2019.

It is almost identical to the Bill that was unanimously sent back to the Government by the Senate Economics Legislation Committee (SELC) in February.

The one area where apparent change has been made is the most controversial aspect of the original Bill: the introduction of an R&D intensity test for the Non-Refundable R&D Tax Offset.

The intensity premium tiers have been reduced from four to three. Crucially, the base rate for claimants has been revised from 4% to 4.5% (cf. the current 8.5%) BUT has been extended from R&D expenditures in the 0-2% intensity range to 0-4%. As such, even more taxpayers will be subject to a base rate marginally higher than was originally mooted with the consensus being that the vast majority of taxpayers were already captured below the 2% threshold.

The genuine fear is that there will be a mass exodus from the program if this Bill passes. The original base rate of 4% was unanimously characterised by those who submitted to the SELC enquiry as well below the minimum rate that would drive R&D behaviour, particularly after compliance costs were taken into account.

Adding half a percentage point will not change that position.

Apart from that, there are very few apparent changes from the original Bill and all the concerns about several aspects of the previously-rejected Bill remain.

Debate was immediately adjourned and sleeves won’t be rolled up until February when Parliament resumes. This provides interested parties with plenty of opportunity to prepare to have their voices heard.

Keep an eye out for future MJA Updates as we work hard to keep the Incentive as a viable tool for addressing Australia’s declining and alarming innovation performance of recent times.

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