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Ditching R&D incentives a ‘double-edged sword’

Ditching R&D incentives a ‘double-edged sword’

Sword

A government report has suggested ditching the R&D tax incentive in favour of more direct financial support to growing businesses, but an accountant said doing so is “a double-edged sword”.

The Innovation and Science Australia (ISA) annual report ultimately encourages more focus on direct funding for industry from the government, which typically occurs through the provision of grants and upfront funding.

Indirect funding includes models like the R&D tax incentive, which requires an upfront spend which is later offset.

Evening out the balance between direct and indirect spending would put Australia more in line with international practice, the ISA report suggested, but R&D director at KPMG, Georgia King-Siem, believes it is a “double-edged sword” as far as the incentive goes.

Direct funding would allow the government to better target its spending, and boost industries in need of innovation funding.

“However, markets that the government considers either not a strategic priority or not globally competitive will miss out,” Ms King-Siem told My Business’ sister publication Accountants Daily.

“What you might end up with is a company that was claiming the R&D tax incentive will no longer be able to.

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“So there will be winners out of this, but there are inevitably going to be losers as well.”

Accountants Daily reported that there is a general sense among accountants that the R&D tax incentive is on shaky ground, which has been compounded by a series of reviews – notably the 2016 Ferris, Finkel and Fraser review – and regulatory tinkering through a series of ATO alerts.

PwC has also reported “very noticeable” hold-ups in refunds for clients, compounded by the high levels of scrutiny the tax office applies to claims.

“There is this constant tweaking. It causes instability in the market because people just don’t know if it’s the last change and if it’s stable. How do you budget your five or six-year innovation spending like that, what does the roadmap look like?” Ms King-Siem said.

 

Ditching R&D incentives a ‘double-edged sword’
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