The federal government this week released several recommendations in its review of the research and development (R&D) tax incentive document, with a view to improve the performance of the R&D program and sustain it for the long term.
Considering the recent reduction of 1.5 per cent to the R&D offsets, BDO predicted that industries that are expensive to enter are most likely to be adversely affected by the proposed $2 million cap on the annual cash refund.
The proposal to limit the introduction of a collaboration premium of up to 20 per cent for the non-refundable tax offset plays to the strengths of the “larger end of town” with turnovers of over $20 million, added BDO Australia’s R&D tax partner Nicola Purser.
“We believe it should be opened to all, including SMEs. While the panel has mentioned that the reason is that SMEs receive a refundable benefit (i.e. cash back), they have failed to recognise that this is purely a cash flow benefit. Due to the way that the program interacts with the franking system, there is currently no permanent benefit for successful SMEs in claiming R&D,” said Ms Purser.
She also noted some significant issues in respect to the proposed administrative changes.
“Processes can always be improved and BDO would support further streamlining. Other countries do run similar programs through a single agency very successfully. Specialist knowledge would need to be retained, however, and this could be achieved by merging parts of the ATO and AusIndustry,” she said.
“We do not agree, however, with publishing company lists and refund amounts received. The increased administration would outweigh the transparency benefits and we believe that, without context, the average person would not understand the quantum of the refund received for R&D projects, and that the increased intellectual property concerns that would be raised might discourage some people from accessing the R&D program,” Ms Purser said.
In more positive news, BDO welcomed the increase of the R&D intensity threshold to $200 million, so that large, R&D-intensive companies retain an incentive to increase research and development in Australia.