Australian government wants to reduce R & D tax breaks for businesses
…luckily the opposition have confirmed they will block the proposed change.
It is wise to encourage businesses to invest in research.
New technologies drive economic growth and allow countries to stand out as a place to invest
Despite this, the Abbott government wants to cut tax breaks for companies that conduct research and development. Luckily Labor and the Greens have confirmed that they will vote against the change.
Legislation to reduce the R&D tax offset by 1.5 percentage points was listed for debate in the upper house on Wednesday.
The bill’s passage would save the federal budget $810 million over four years.
Labor and the Greens may have acquiesced raising petrol tax, but they are refusing to back the government’s R&D changes.
Companies such as Australia’s largest biotechnology manufacturer, CSL, say the change is unfair because the government is not delivering the commensurate 1.5 per cent company tax cut it also promised but then withdrew for all but small businesses.
Opposition spokesman for research Kim Carr said Labor would vote against the changes in the Senate.
“We will opposing the government’s cutting of the R&D tax benefit,” he said.
“The government has given absolutely no justification for its actions and if implemented this measure will have a serious impact on the capacity of this country to provide the high-skilled jobs for the future.”
Greens science spokesman Adam Bandt said the same measure was defeated in the Senate last year.
“This is a blow to smart business from a government of slow learners,” he said.
“Parliament has already rejected this cut of hundreds of millions of dollars to research and development.”
“The Abbott government is cutting R&D spending to the lowest since records began.”
The Senate approved major changes to R&D last year. Access to R&D tax relief was restricted to outlays of up to $100 million, allowing the government to bank $1.1 billion in savings.
Independent senator Jacqui Lambie voted ‘no’ with Labor and the Greens but the government had the crucial votes of the five other cross-benchers.
The government previously pursued a $20 billion turnover threshold but that was abandoned in favour of the $100 million expenditure limit.
The $20 billion threshold idea, which would have affected 15 to 20 of the biggest companies, was in fact a Labor proposal under then prime minister Julia Gillard. The money saved was to be redirected to small companies.
If approved by the Senate, the latest cut will take retrospective effect from 1 July 2014.
“In CSL’s view, these are retrograde measures,” CSL said in a submission to the government’s tax review.
“They make Australia a less attractive location for R&D and, because R&D is an essential complement to advanced manufacturing, detract from rather than enhance the prospects for advanced manufacturing in Australia.”
Kris Gale, who runs a firm that specialises in helping companies access R&D tax breaks, said the combined effect of the $100 million expenditure cap and 1.5 per cent offset reduction would reduce government support by at least a third.
“This represents the single largest cut to Australian innovation support since the 1996 changes to the concession…which saw Australian business expenditure on R&D drop for five years consecutively after two previous decades of growth.”
Business investment in R&D is poor in Australia by global standards.
In his budget reply speech, Labor leader Bill Shorten said Australia should devote 3 per cent of gross domestic product to R&D by the end of the next decade.
The reality is that if Australia wants a bigger slice of the global tax pie, it should invest in education and research so the next Google emerges here rather than overseas.
“Information technology is responsible for a substantial proportion in the increase of productivity and wealth that is experienced worldwide,” the association says.
“If the Australian government wants a bigger share of this income to be generated in Australia – and therefore taxable by the Australian government – it also needs to put in place a range of other measures to support the domestic ICT industry, practically in relation to STEM education and skills and incentives such as the R&D tax incentive.”
STEM stands for science, technology, engineering and maths.