The Government will introduce changes to its draft legislation outlining the changes to the R&D tax credit within the next few weeks, with the goal of introducing the final legislation into Parliament before July 1.
But these proposed changes have not stopped the Federal Opposition from publically opposing the draft legislation, which has been criticised by SMEs for restricting the definition of R&D and excluding businesses from obtaining the credit.
Yasser El-Ansary, tax counsel with the Institute of Chartered Accountants, says discussions with the Government last week regarding the draft legislation were successful, and amended legislation should be put forward within the next few weeks.
The discussions were prompted by an outcry from SMEs due to the perceived restrictive nature of the legislation. Whereas previously businesses could be eligible for the credit if they could prove their activity was either innovative or risky, the new draft indicated the behaviour must now satisfy both requirements.
“We pointed out these concerns, and the Treasury has been looking to change these things. We have been discussing four significant issues, which are the core definition of R&D activities, the definition of supporting activities, the feed stock rules and commercialisation and the R&D system relating to software.”
“These are the four main areas of concern, and there is a preparedness on the part of the Government to change these issues and that is what Treasury is working on right now.”
The software industry in particular was concerned about the new changes, as software development was to be excluded from eligibility. Additionally, many IT companies pointed out that the draft legislation seemed to reward activities that failed to reach a commercial stage.
But while the Government is now looking at changing the draft legislation, this hasn’t stopped the Opposition from speaking out against the changes. Opposition spokesperson for industry, innovation, science and research, Sophie Mirabella, has said the changes will shut out SMEs within the technology, manufacturing, engineering and mining sectors.
“The exposure draft as it stands would gut the very important incentives that have enabled Australian innovation to flourish from cutting-edge biotechnology to our substantial manufacturing sector,” she told the Australian Financial Review.
“Contrary to Treasury assertions, the proposal will be a revenue-raising measure and will destroy the current research and development tax concession.”
However, El-Ansary says he believes the Opposition may have spoken too soon in criticising the bill in its early stages.
“I think it’s still too early to make that conclusion regarding the draft legislation, I think it’s important to wait and see what it will look like with the changes. There may or may not be a need to have the legislation referred to a committee.”
“We are still hopeful of the Government and Treasury releasing an updated draft of the legislation within the next few weeks, and then be in a position to adjust that. Hopefully the final legislation will be introduced to Parliament before July 1.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
