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MJA Updates

The R&D Tax Incentive: Still To Cement A Legacy

October 5, 2021 Kris Gale

Earlier this month, the Australian Government published an article on its business.gov.au website celebrating 10 years of the R&D Tax Incentive (RDTI), lauding the fact that more than 30,000 companies have accessed the program since it began in July 2011 including 2,000 to 3,000 new businesses per year. In the article, the 2011 legislation was praised for making the government support framework far more attractive that the predecessor R&D Tax Concession (the Concession) which was being accessed by 8,000 companies at the time of the RDTI’s introduction.

This “celebration” coincided with the recent publication of Australian R&D expenditure figures that spoke to a decline in real terms of Australia’s R&D performance over the period of the RDTI’s operation to date. In FY 2012, Australia spent $18.3 billion on R&D which was 2.11 % of GDP. Eight years later, in FY 2020, the spend was down to $18.17 billion, representing only 1.79% of GDP. It goes without saying that other economies are observed to be moving in the opposite direction.

In short, R&D performance has declined in the 10 years following the introduction of a more valuable and attractive government support measure. One could argue that the celebrations should be muted at best and there remains a clear need for stakeholders to come together to make sure that the RDTI does cement a real legacy.

Program Participation: Plenty Of Comings But Plenty Of Goings

The article’s trumpeting of the fact that more than 30,000 companies have accessed the program in the past 10 years actually raises a number of questions, given the evidence that the RDTI has been spinning its wheels somewhat as Australia tumbles down the R&D international rankings. If we look more closely at the Government’s own numbers, serious concerns arise as to why so many claimants don’t stay in the game.

At the recent 1 September 2021 RDTI Roundtable, jointly hosted by AusIndustry and the ATO, the number of RDTI registrants for 2019/20 was given as 11,485 which is down from the program’s peak of approximately 15,000 some 4 or 5 years earlier. For the purposes of this discussion, let’s be generous and say that there are 12,000 current participants which is about 4,000 more than when the RDTI began in 2011.

Let’s say all 8,000 companies carried over from the Concession and claimed the RDTI in its first year. And let’s take the low side of the claim in the RDTI Bulletin and impute that 2,000 new businesses joined the program each year ie. 20,000 in the first ten years. So 8,000 + 20,000 gives us 28,000 companies that have used the RDTI which accords with the claim by the Government that 30,000 companies that have used the program to date. But it does immediately beg the serious question as to why 16,000 to 18,000 companies have left in the same time period.

Curiously, at the Roundtable, the Government claimed that only approximately 400 companies had departed the program in FY20 and theorised that the causes might include COVID-19 and the national bushfires. This feels like a clear understatement based on the logic of their own figures and there appears to be no doubt that there are a number of other factors at play regarding the net loss of claimants.

We submit that the reputation of the RDTI has suffered mightily since 2015 through a variety of factors that have been much ventilated in the MJA Update over many years. The size of the loss of participants merits an immediate investigation. If companies are doing eligible R&D and not claiming, we need to know why, cost to revenue be damned. After all, the RDTI is seeking to build a sustainable Australian innovation culture.

Board of Taxation Review Offers A Genuine Opportunity For Improvement

MJA Chair, Kris Gale, was recently invited to join the Working Group of the Board of Taxation’s (BoT) Review of the dual agency administration model of the R&D Tax Incentive (RDTI).

The Review has recently concluded a round of public consultations and received a number of significant written submissions that reveal a collective enthusiasm to get the RDTI humming again after a number of years of decline.

We sincerely believe that the BoT exercise is an ideal forum to help understand why companies don’t participate in the program and to help build an environment that better contributes to a vibrant and successful innovation community.

MJA would like to add your voice to this critical reform measure.
To contribute to the BoT review, please do not hesitate to contact Kris Gale on 02 9810 7211 or email

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