Thursday, 09 April 2020 11:56

AIIA urges govt not to pass changes to R&D tax incentive Featured

Ron Gauci: "We must incentivise start-ups and the SME sector to allow for investment and growth." Ron Gauci: "We must incentivise start-ups and the SME sector to allow for investment and growth." Supplied

The Australian Information Industry Association has urged the Federal Government to drop its plans for changing the research and development tax incentive scheme as the result of the coronavirus pandemic which is largely affecting small- and medium-sized enterprises.

The amendment in question is being discussed by a Senate committee at the moment and the AIIA urged a withdrawal of the same and an increase to the incentive to kick start the tech sector when the COVID-19 lockdown ends.

The amendment proposed to the R&DTI will, if passed, take effect on 1 July and affect the country's ability to undertake more ambitious research and development projects, the AIIA said in a statement on Thursday.

It added that this would make Australian companies less competitive against international rivals who provided more generous incentives.

Were the amendment to be passed, Australian ICT firms would have to either outsource R&D activities to overseas entities, thus affecting the local ICT job market, or else stop R&D activities in toto.

AIIA chief executive Ron Gauci said: “It’s important we snap back the economy and business post COVID-19 restrictions - and we must incentivise start-ups and the SME sector to allow for investment and growth.

“One of the impacts of the pandemic has been the shutting down of international travel stopping critical skills and the effects on tech supply chains. Increasing the R&DTI will help boost Australian tech capability and the economy as well as support our digital sovereignty.

“While the aim of the Bill is intended to target larger multinationals, those who will be most affected by the proposed changes will be smaller Australian enterprises, who represent the majority of applicants for the R&DTI scheme. At present, 80% of claimants are Australian companies with an annual income of less than $20 million - this change will affect them greatly.

"The reduced rates outlined in the proposed R&D tax incentive scheme present an incredible challenge to current and future operating businesses in Australia, especially as we start to rebuild and recover our economy post COVID-19. We strongly urge the government to reconsider and reject the current proposal."

The AIIA made the following suggestions regarding the pending legislation:

  • That the current thresholds be raised in line with the new tax rates for SMEs;
  • That the rate for large business are in line with the current tax rate of 38.5%;
  • That the rate for SMEs remain unlinked and at the current tax rate of 43.5%;
  • That the RTDI scheme incorporates a renewed focus on high-risk applicants, which includes better targeting; and
  • That the bill not be retrospective to commence on 1 July.

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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