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Senate committee suggests separate R&D tax incentive for software

A Senate committee into fintech and regtech has urged the government to introduce quarterly R&D tax payments for technology firms, along with new requirements that would force listed companies to disclose post-capital raising.

Tax&Compliance John Buckley 04 May 2021
— 1 minute read

The select committee on financial technology and regulatory technology last week released its second report on how the federal government could better support research and development (R&D) activities across the technology sector, specifically related to software and blockchain. 

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The committee, led by senator Andrew Bragg, handed down 23 recommendations. The first of them suggests the R&D tax incentive be amended to allow for different assessment methodologies so tax payments can be made quarterly, instead of annually. 

Meanwhile, the committee also recommended the government introduce a new, separate tax for software, because eligibility for the research and development tax incentives (RDTI) remains unclear.

The committee also suggested the government abolish interest withholding tax — as per the recommendations of the Johnson Review — and offer amendments to existing legislation to require post-capital raising disclosure from listed companies. 

“The committee is recommending that different assessment methodologies be allowed under the RDTI scheme, and that consideration also be given to a standalone scheme for software development,” the report said.

“The timing of RDTI payments was also raised with the committee, with the suggestion that payments be changed from annual to quarterly to assist with cash flow for businesses without increasing the overall cost of the scheme. This is a sensible measure that would provide important support to new start-ups.”

The new recommendations follow the committee’s interim report, released in September last year, which handed down 32 recommendations before the government announced refreshed R&D tax incentive guidance in November last year. 

The then-minister for industry, science and technology, Karen Andrews, said last November that the improved guidance product would offer straightforward and accessible advice for companies accessing the R&DTI, making it easier to find the information they need.

She said the guide was developed in conjunction with tax agents and businesses, and now features plain English, less duplication, and helpful diagrams and examples, together with content aligning with recent Federal Court and Administrative Appeals Tribunal (AAT) decisions. 

A key change between the previous 2016 guide includes a new definition of “hypothesis” as “an idea or proposed explanation for how you could achieve a particular result and why that result may or may not be achievable”.

It marks a change from the previous guide where it said a hypothesis should be “expressed as a causal relationship between variables”.

The refreshed R&D tax incentive guidance came off the back of the government’s 2020–21 federal budget commitment of $2 billion to the incentive, which was later criticised by Australia’s start-up community and some big businesses.

Senate committee suggests separate R&D tax incentive for software
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John Buckley

John Buckley

John Buckley is a journalist at Accountants Daily. 

Before joining the team in 2021, John worked at The Sydney Morning Herald. His reporting has featured in a range of outlets including The Washington Post, The Age, and The Saturday Paper.

Email John at This email address is being protected from spambots. You need JavaScript enabled to view it.

Tax&Compliance