Prime Minister Scott Morrison has now hinted at changes to his government’s plan to cut the research and development tax incentive, in light of its $1.5 billion manufacturing strategy.
PM flags R&D cuts walk-back
Speaking at the National Press Club on Thursday, Mr Morrison unveiled plans to invest $1.5 billion to support the future of manufacturing in Australia.
When pressed on how those plans would reconcile with the R&D tax incentive bill before the Senate that would see the government save $1.8 billion, Mr Morrison hinted at a potential walk back.
“We certainly want to encourage more research and development. And our answer to that question will be delivered by the Treasurer next Tuesday night,” Mr Morrison said.
The R&D bill, which was first announced in the 2018 budget, contains changes that introduce a cap of $4 million per year for companies with a turnover below $20 million.
Companies with a turnover of $20 million or more will face an intensity-based test.
The bill failed to gain the support of the Senate Economics Legislation Committee in early 2019 and lapsed with the calling of the federal election, but it was later reintroduced into Parliament in December.
It has been referred to the same Senate committee for further scrutiny, with the report due on 12 October, close to a week after the federal budget.
A number of professional bodies — including Chartered Accountants Australia and New Zealand, the Corporate Tax Association, CPA Australia, the Institute of Public Accountants, Law Council of Australia and The Tax Institute — wrote to the Treasurer in June to call for certainty on the changes.
The joint bodies have sought a deferral of the start date to 1 July 2021, and have urged the government to confirm that R&D tax claims made in relation to the 2019–20 and 2020–21 income years would be subject to current enacted legislation.