Retrospective RDTI changes ‘simply unfair’

A government plan to apply its highly contentious changes to the R&D tax incentive retrospectively is “simply unfair” and “opportunistic” and will damage early-stage companies, a Senate committee has been told.

If passed by Parliament, the significant reforms to the research and development tax incentive (RDTI) – amounting to a $1.8 billion cut – would be applied for the current 2019-20 financial year.

A number of submissions to the Senate Economics Legislation Committee, which is conducting an inquiry into the changes, raised concerns with the retrospective nature of the changes, with companies having already launched major projects based on the current RDTI rules.

The changes to the RDTI were first flagged in the 2018 budget, and the Coalition attempted to pass them through Parliament early last year, but this was stymied but the same senate committee.

Despite some minor tweaks, the changes are largely the same as first announced: an increase of the expenditure threshold to $150 million, a $4 million cap for smaller companies and the introduction of an intensity measure to calculate the tax offset for larger firms.

The new bill does push back the start time of the changes to the 2019-20 financial year, but this makes them still retrospective.

The Australian Small Business and Family Enterprise Ombudsman, which conducted a review of the RDTI scheme last year that included 24 recommendations to government, said the changes should not apply until the next financial year.

“This would avoid any retrospective effect that the bill might otherwise have. Additional time is necessary to allow for clear guidance material to be developed and effectively disseminated by both agencies, and for SMEs to take technical accounting advice in order to plan appropriately and ensure compliance,” the Ombudsman said in a submission to the senate committee.

The federal government has claimed that Australian businesses have been aware of the changes since they were flagged in draft legislation in late 2018, but in its submission RnD360 Advisory Group argued this was disingenuous.

“The federal government’s statement that companies had been forewarned of the current re-elected government’s intent to implement the proposed changes, and therefore that all companies should have planned for them to come into effect from 1 July 2019 is weak, and opportunistic, but also simply unfair,” the RDTI advisory group said.

View the full original article at https://www.innovationaus.com/retrospective-rdti-changes-simply-unfair/