IT industry associations have warmly applauded a proposal to change an Australian research and development tax concession into a more simplified credit to boost local innovation.
A recent review into the national innovation system, venturousaustralia, chaired by Dr Terry Cutler, has made 72 recommendations on how to improve innovation and development. One of the most prominent was to scrap the R&D Tax Concession – which had been cut from 150 per cent to 125 – and replace it with a 40 per cent tax credit.
Australian Information Industry Association (AIIA) CEO, Ian Birks, highlighted an additional proposal to increase the rate of assistance to small firms, lift the turnover threshold which defines ‘small firm’ tenfold to $50 million, and remove the expenditure threshold on R&D altogether, as vital to the nation’s international ICT competitiveness.
“I think this is probably the most impactful and significant part of the review recommendations,” he said. “It simplifies and improves the R&D tax benefit from a tax concession to a credit.
“If it gets through I think it is the most significant element of the review in terms of improving global competitiveness of our innovation system, which indeed improves our ability to have better investment in ICT in this country.
“A lot of medium-sized Australian companies in our sector have got there by being effective within this country but not necessarily having a great focus on expansion into overseas markets. That’s not true of all but it is true of some and this would certainly encourage a greater degree of innovation in a number of those companies.”
Chair of software development organisation Software Queensland, Grant Cause, was equally pleased with the tax reform recommendations.
“I think it is about bloody time actually, it makes life a heck of a lot easier for business,” he said. “To get the tax concession you have to fill out a bunch of paperwork usually toward the end of the year and you also have to fill out all sorts of different surveys for the government. Accessing a simple tax credit, once you have basically proven you are doing real R&D, will make life a lot easier.
“If you look at other countries like the UK and the rates they are getting, it is far better than what Australia is offering.”
Australian Computer Society (ACS) president, Kumar Parakala, said that while not all of his organisation’s suggestions were adopted, the Cutler review was a good start in helping Australia catch up to other leading innovating countries.
“ACS and our members are very pleased with the recommendations of the paper that basically say we need to have a long-term vision for innovation and there is a particular emphasis on R&D tax concessions and lifting innovation spending,” he said. “I think that is brilliant but a greater emphasis needs to be placed on ICT in the innovation system which has not been adequately recognised.”