Leading tax advisers question R&D incentives

Leading tax advisers question R&D incentives

A leading tax adviser has urged the federal government to reconsider its proposed changes to the research and development (R&D) tax, and to shift its focus towards mid-sized businesses.

In this year's federal budget, the government announced that the R&D Tax Incentive would be decreased by 1.5 per cent, originally proposed in line with a cut in the company tax rate of the same amount. However, only small businesses ended up receiving the proposed tax cut, leaving mid-sized to large companies to take a hit in their R&D bottom line.

Shane Crockett, tax director at William Buck, argued that mid-sized businesses (companies with turnover of between $2 million and $20 million) had the most to lose from the proposed changes, and currently reap the most benefits from the existing incentives.

Mr Crockett noted that a ‘one size fits all’ system is inadequate since a majority of small businesses are not investing in the R&D space, whilst bigger companies do not require the incentives available to undertake R&D.

“The R&D tax incentive is most valuable to mid-sized companies, namely, those businesses that need to conduct R&D for a very specific purpose to remain competitive and relevant in a global marketplace,” he said.

Mid-sized businesses have generally moved beyond the start-up phase of development and require a helping hand for future growth, Mr Crockett added.

“The government is challenging businesses to drive the economy forward but they are taking away some of the important tools to enable them to do it”, he said.

According to Mr Crockett, the tax cuts will not only stifle entrepreneurship but will hinder mid-sized companies looking to grow and establish themselves as larger entities.

Meanwhile, Stephen Carroll, R&D tax services director at RSM Bird Cameron, also voiced his concerns about the current state of R&D incentives.

“The Federal Government needs to adopt a better approach to improve the economy’s competitiveness, to help encourage and incentivise corporate Australia to engage in research through the life cycle of innovation,” he said.

While stating that the current system does stimulate R&D within Australia, Mr Carroll said there were limits regarding critical commercialisation and scale-up phases.

The R&D Tax Incentive should be targeted towards start-up businesses and should encourage collaborative efforts with research institutions, he said.

Leading tax advisers question R&D incentives
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