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Eligibility requirements for the research and development tax incentive should be overhauled, says the Australian Small Business and Family Enterprise Ombudsman.
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Ombudsman calls for ‘transparent and predictable’ R&D tax incentive
12 January 2021
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9 minute read
“The R&D Tax Incentive eligibility requirements need to be changed so that it is clear and simple to claim tax incentives under the existing scheme,” said ASBFEO Kate Carnell.
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“Our R&DTI report, released in December 2019, found many small and family businesses were subjected to examination and audit several years after the R&D was undertaken and the R&DTI refund had been spent.
“This has had a devastating impact on the businesses involved, with some discontinuing or scaling down their R&D efforts in Australia and reducing their R&D staff.”
Barring a rethink of eligibility requirements, Ms Carnell believes a dedicated software-specific R&D tax incentive should be created in light of the 48 per cent of claims that arise from the industry.
Ms Carnell’s latest submission to the government’s financial technology inquiry comes after reforms to the R&D tax incentive passed Parliament in October 2020, following the government’s commitment to invest $2 billion in the incentive.
Refreshed guidance around the tax incentive, peddled as straightforward and accessible advice for companies, has since been released by the government.
However, Ms Carnell believes more needs to be done to promote growth and investment.
“With 80 per cent of all R&DTI claims made by Australian SMEs, it is clear that many small and family businesses rely on the R&DTI to help fund their research and development,” she said.
“We welcome submissions supporting my office’s long-held position on this issue, including Atlassian’s reported ‘strong endorsement’ of an interim recommendation to clarify the existing scheme and put a time limit on any potential clawback action.
“At the end of the day, we want small businesses to grow into big businesses such as Atlassian and a fit-for-purpose R&DTI scheme is a key support mechanism.”
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