Industry remains firmly opposed to changes to R&D bill

03 February, 2014

Business remains fundamentally opposed to changes to the Research and Development (R&D) Tax legislation, currently before the Parliament, which would deny larger business access to the R&D Tax Incentive.

"This change would significantly detract from productivity-boosting R&D activities in Australia," Australian Industry Group chief executive Innes Willox said in releasing Ai Group's submission to the Senate inquiry into the Tax Laws Amendment (Research and Development) Bill 2013.

"Innovation by business, including innovation associated with business engagement with research and development, is critical to the future success of the Australian economy. It is particularly important at the moment to address our legacy of low productivity growth and to foster new sources of growth to assist the economy rebalance as the boom in mining investment wanes.

"Business R&D is a key path in the development of these new sources of growth, as part of a broader systemic approach to innovation policy that builds Australia's areas of competitive advantage and our attractiveness to international investors.

"Australia's R&D tax arrangements have been central to the very strong growth in expenditure on R&D by Australia's businesses over recent decades. Contrary to the claims made in support of the legislation before the parliament that larger businesses are less responsive to tax incentives, this expansion of research and development spending has been led by large businesses whose proportion of business spending on R&D has increased," Willox said.

"Large businesses also lend considerable support to Australia's broader innovation system through their relationships with other innovative businesses; their commercial links, particularly with businesses supplying technical and scientific services; and the links and contracts they have with Australia's publicly funded research organisations.

"The proposal to deny larger businesses access to the R&D Tax Incentive is not supported by clear evidence. This lack of information is recognised by the government's commitment to undertake a more thorough investigation of R&D tax arrangements over the course of 2014. The current proposal should not be pursued without the benefit of this more detailed assessment," Willox said.