BDO welcomes Senate Committee request to defer R&D Tax Changes

12 February 2019

BDO Australia has welcomed the Senate Committee recommendation to defer consideration of the contentious R&D Tax Bill.

The Committee met yesterday and recommended that the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 [Provisions] is held until further examination and analysis of the impact of schedules 1–3 is undertaken.

In particular, the Committee recommended that:

  • the approach to the cap on the refundable portion of the R&D tax incentive is refined, noting investment decisions already taken; and
  • the formula for R&D intensity is refined, noting inherent differences in R&D intensity across industries and impacts on businesses with large operating costs.

BDO R&D Tax Partner, Nicholas Parry said: “It’s a good decision that they’ve recommend the Bill be deferred for further consideration.”

“If it had gone through as is, there would be less incentive for R&D spending among larger companies under the new "intensity measures",” he said.

“In their current form, the measures would force many Australian businesses to opt-out of the scheme once they did their cost-benefit analysis.”

“The irony is that these are medium to large Australian businesses who have greater capacity to set up their R&D offshore.”

“Businesses would need to be spending at least 13.25 per cent of expenses on R&D to get a higher tax offset than they had been, and hardly any Australian companies with turnover above $20 million are doing that or even can do that.”

“BDO remains supportive of a cap to ensure sustainability of the program but we’re pleased that the committee recognised concerns regarding the lack of transition arrangements and the potential broadening of the carve out for clinical trials.”

Related media coverage:

The Age / Sydney Morning Herald - Startups face more unknowns as brakes put on R&D changes