R&D Tax Credit bill passes lower house

Like a spent fighter coming back from the brink after teetering on the ropes in the dying stages, the federal government’s R&D Tax Credit bill is still standing at the 12th round bell with only one more round to go.

Innovation minister Kim Carr today thanked the independent MPs as well as the Greens for voting in favour of the bill today in the lower house.

Read more about the R&D Tax Credit.

Now what’s left is for it to get through the senate where the coalition alone lacks the numbers to block it.

It also remains to be seen whether the bill will be applied retrospectively from July 1, which had been the government’s stated intention from the outset, a point on which it now says it is willing to reconsider.

“The new R&D Tax Credit will help small and large businesses to innovate, to become more productive and compete in a global economy, preserving and creating jobs for Australians,” said the Senator today.

“Reforming business R&D support will deliver better value for money for business and Australian taxpayers than the current R&D Tax Concession.” “The outmoded Tax Concession failed to deliver sufficient incentives to Australia’s engine room - small and medium enterprises - and allowed some companies to use taxpayer dollars to subsidise ‘business-as-usual’ activities, rather than genuine R&D."

Among the key benefits outlined by the government is a 45 per cent refundable credit for SMEs (in this case companies earning less than $20 million) thereby allowing companies in tax loss to receive a cash refund, effectively doubling the current base rate from 7.5c to 15c in the dollar.

Companies with turnover of $20 million or more would get a 40 per cent non-refundable tax credit and will be allowed to carry forward any unused offset amounts to reduce future tax liabilities, increasing the base incentive from 7.5c to 10c in the dollar.

However, the opposition, chanting its familiar mantra, charges that the government is yet to provide modelling and other details to support its claims, arguing that the bill rewards failure and would actually harm a number of key industries, including building and manufacturing while also hurting the very SMEs the government says will benefit.

The government has responded with its predictable rejoinder that the coalition is merely aiming a wrecking ball at the new legislation sight unseen.

But the opposition is not alone in voicing concerns, with each of the big four accounting firms having raised a number of issues.

For instance, in a submission to the Senate Economics Legislation Committee Inquiry in May, Deloitte partner Serg Duchini expressed a number of concerns, leading him to conclude that “compared with the existing R&D Tax Concession the bill will not deliver improved outcomes, administrative simplicity and transparency for many Australian corporates.”

The opposition also objects to the Bill’s definition of ‘R&D activities’, while the government maintains that it streamlines and gives greater clarity, noting for instance that ‘factory floor’ R&D qualifies.

The opposition also objects to the government’s plan to make the legislation apply retrospectively from July 1 this year, a move it says will likely cause companies unnecessary disruption, confusion and expense.

On this point, however, it appears that the government has softened its stance.

“The Government is aware of calls for the start date to be altered, and is willing to reconsider this question should it be raised by the Senate,” a spokesperson for the senator told ALS.