Quarterly payments of R&D tax incentive stalled in review

AusBiotech is urging the Coalition government to deliver on its pro-business rhetoric and pass the R&D Tax Incentive’s quarterly payments legislation.

The much-anticipated measure has been earmarked as “further consultation required” in Treasurer Joe Hockey’s plan to deal with the backlog of unlegislated tax measures: ‘Restoring Integrity in the Australian Tax System’.

After an extensive consultation period, the release of an exposure draft and explanatory memoranda and costings included in the May Federal Budget in 2013, the quarterly payments legislation was caught in the pre-election dissolution of parliament, leaving its progression and its planned implementation date (1 January 2014) uncertain.

AusBiotech has been advocating for quarterly payments since the first announcement on the tax incentive in 2009 and was pleased to see the initiative supported and the legislation progressed, as the measure would give companies, which are often pre-revenue, the ability to smooth out cash flow over the year and provide increased predictability.

A survey conducted by AusBiotech indicated the timing of the receipt of payments (ie, quarterly or annually) will be a critical factor in its value as an incentive for additional R&D activities.

Dr Anna Lavelle, CEO of AusBiotech, said: “We applaud the Coalition’s explicit pro-investment remarks that Australia is ‘open for business’ and AusBiotech urges the government to continue with much-needed tax reform and deliver this pro-business measure to support young, innovative, home-grown companies that are commercialising our health and medical research.

“The quarterly payments have been carefully reviewed, planned, consulted upon and costed by government with industry. To lose the payments now would be a further blow to small start-up innovative companies that have been struggling in the post-GFC and ‘unfriendly’ business environment.”

Quarterly payments were planned as an opt-in element of the R&D Tax Incentive for companies with an aggregated turnover of less than $20 million. It will allow companies eligible for the R&D refundable tax offset to obtain the benefit of the offset on a quarterly basis during an income year, rather than waiting until an income tax return is assessed.

The quarterly payments form one important part of further tax reform that is being sought by industry leaders, to provide incentives for innovation and manufacturing to support Australia’s future and keep us internationally competitive by growing our industries of the future, attracting business and the resulting jobs, economic growth and exports.

AusBiotech advocates making tax incentives an asset for innovation and business, with three major pillars:

• Retain the R&D Tax Incentive, which is a top priority for the life sciences industry, and extend its value with the implementation of quarterly payments;
• Introduce the Australian Innovation & Manufacturing (AIM) Incentive, a ‘patent box’-style incentive to keep intellectual property (IP) and the related manufacturing in Australia once it reaches commercialisation; and
• Introduce fiscal incentives for investors in pre-revenue, pre-dividend companies.