The R&D Tax Incentive – Welcome To The Second Chance Saloon

July 2, 2021 Kris Gale

In one of those ‘blink and you missed it’ moments, the R&D Tax Incentive (RDTI) turned 10 years old earlier this week.

This MJA Update has chronicled the tumultuous times associated with the program ranging from the unbridled enthusiasm with which the Federal Government promoted the benefits in the early years to the intensely difficult 2015-2019 period referred to as “the crackdown”. Now on the other side of public pressure, a telling Ombudsman’s report, welcome legal precedent and, yes, a pandemic, the RDTI seems poised to provide a relatively stable funding mechanism for Australian R&D and innovation.

And, 1 July 2021 saw the commencement of fresh RDTI legislation that claimants will need to absorb. The new package sees the preservation of the current offset rates (43.5% Refundable; 38.5% Non-Refundable) going forward, introduction of an intensity premium and a higher annual claim limit ($150 million) for Non-Refundable taxpayers and new uniform clawback and catch up deductions. Other features include a reduced period of review for Refundable claimants and new wrinkles around the disposal of fixed assets used for R&D.

Add to the mix the opening of the new registration portal on 5 July, there is plenty to be going on with but, overall, we have a program that has been largely improved in terms of its value paradigms and it now has the luxury of bipartisan support. And, it is based on the exact same definitions of eligible R&D activities and expenditure that were introduced 10 years ago. This is an outstanding feature because of the stability that entails. So, there hasn’t been a better time in the last half dozen years to take a fresh look at how the RDTI can effectively take your business forward.

Given this fresh face that the program has been given, it is with a slightly cocked eyebrow that we received the details of the Board Of Taxation Review of the dual administration of the program by AusIndustry and the ATO. Consultation sessions are to be held in July and August with written submissions being accepted up until 15 September.

MJA has been invited to participate in the consultation process and we will do so in the spirit of always supporting initiatives to improve the program. However, we will not be advocates of any major reforms and we will be supporting the current dual administration system.

Given the travails the program has endured in the past half dozen years, we believe the program should be given a chance to breathe and there should be no more changes for the foreseeable future. Change fatigue has been a real impediment to the program’s viability in recent years. Enough already.

The fact is the legacy of the first 10 years of the RDTI is a very mixed one. More companies are claiming R&D but the value per claimant has fallen and the overall national R&D spend has declined significantly in real terms. Other countries continue to motor ahead. Let’s now focus on all getting around the new provisions and ensuring that eligible companies can more readily access the benefits they are entitled to. The RDTI has been given a second chance. Let’s not blow it.

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