Money
Issue No. 12 - August/September 2003
Taxing Times
Tax Matters — Keeping you up to date
by John Rawson
R&D report a recipe for long—overdue reforms
A Federal parliamentary report has provided the groundwork for some long overdue reforms to the research and development regime for the business sector.
Many of the recommendations of the House of Representatives Standing Committee on Science and Innovation have the potential to lift the level of research and development activity conducted by Australian firms.
The recommendations are a genuine attempt to bring Australia’s R&D regime into the 21st century.
In a modern, global economy, there is greater competition for capital, talent and innovation, and the report acknowledges the steps to make Australia a more attractive place to invest.
A welcome sign is that the report is canvassing reform to extend R&D benefits to areas such as intellectual property and to the services sector.
However the parliamentary report has sidestepped the issue of raising the present base rate of 125 percent for research and development tax concessions.
The reduction of the corporate tax rate from 36 percent to 30 percent in recent years has eroded the after—tax benefits of the R&D tax concession.
Australia’s 125 percent R&D tax concession still delivered less benefits than the concessions offered in China, the United Kingdom and Singapore.
But it is pleasing that the parliamentary committee’s report on business commitment to R&D has considered reforms to a range of assistance measures.
The committee’s recommendations that non—labour related components should be included in the calculation of the 175 percent incremental premium are welcome, as are moves to extend and promote the R&D tax offset, or cash rebate.
The committee has recognised that the exclusion of non—labour components in the incremental premium worked against the interests of companies engaged in capital—intensive R&D.
In addition, the committee’s recommendation to review the eligibili...
