BDO response to the R&D Tax Incentive Review Issues Paper
03 March 2016
Why changing the R&D Tax Incentive is not the answer
On the whole, Australia’s Research & Development (R&D) Tax Incentive is a well-constructed piece of legislation that encourages industry to undertake R&D activities that improve the competitiveness of Australian companies.
This is the key message of BDO’s recent submission to the Federal Government’s issues paper.
As a practitioner who’s worked in the area of R&D incentives for many years, across a number of jurisdictions, I can understand the Government’s desire to rein in the programme’s costs. What I hope is that it wouldn’t take such action at the expense of weakening what is a successful programme.
The R&D Tax Incentive achieves what it has been designed to.
If it’s not broken, don’t fix it
The programme encourages companies to undertake R&D that otherwise might not occur. It is this activity that drives the innovation we need to ensure Australian businesses can remain competitive in an increasingly challenging global market.
Perhaps the Government should instead readjust its view and consider the continued growth of applicants as a sign that the Incentive is – for the most part – working exactly as intended, instead of looking at it as a possible source of funds to prop up its budget.
Business needs certainty
Many companies – large and small - have made long-term plans based on the assumption that the R&D Tax Incentive would continue as it has since its introduction in 2011.
To flag substantive change less than five years after its introduction without first investigating its effectiveness is deeply troubling.
BDO has made several recommendations that could help improve its effectiveness. Two of these include:
- Improving collaboration between publicly-funded research institutions and industry
The French system rewards industry partners for undertaking R&D projects in collaboration with public research organisations by allowing businesses to claim 200 per cent of the costs invoiced by public research organisations – that is something that could be introduced here.
- Bringing in systemic compliance rather than the current reactionary response
The current system places a substantial focus on the ‘requests for information' (RFI) and review meetings, placing an unnecessary administrative burden on AusIndustry. Given the high levels of compliance in the programme we believe a less risk-averse approach could help streamline the process and reduce costs.
BDO’s full submission can be viewed on our website.
If you have any questions about the R&D Tax Incentive please connect with me.