Government accused of R&D tax rush-job

Government accused of R&D tax rush-job

Will need to deal with cross-benchers to pass R&D tax legislation as Coalition declares opposition

Several parties have accused the Federal Government of rushing through proposed changes to R&D tax benefits after its first draft was widely panned by a range of industries.

The criticism comes despite a backflip by the Government that saw a second draft bill released for public comment just before Easter. The latest attempt changed many of the unpopular aspects of the first bill, such as a narrowing of the definition of software R&D.

Deloitte R&D tax incentive practice national leader, Serge Duchini, said the second bill was a drastic improvement on the first.

“The real test is if it’s better than what we currently have,” he said. “What they’ve done with this new exposure draft is introduce a new definition of core R&D activities – one of which is focused on experimental activities.

“The software rules are significantly better than what was in the exposure draft and in many ways better than what we have now.”

But Duchini said there was a significant way to go and claimed the process was both “undercooked” and needed more time before implementation.

“What has been achieved in the past six to eight weeks has been rushed and it was a shame we didn’t get to this point earlier in the piece,” he said. “The exposure draft was horribly flawed and it failed to take into account any of the submissions made.

“That’s where we really lost ground. We’ve got to the point where we’re working hard trying to fix something for July 1 but we’re really hard up against it. The current consultation period is only 10 days with Easter and I do feel we’re being compressed unnecessarily.”

Duchini called for the deadline to be extended to July 1, 2011.

“This is a new regime and every section has been re-written. Between now and July 1, we just don’t have time,” he added.

Shadow Minister for Innovation, Industry, Science and Research, Sophie Mirabella, also indicated the Coalition would vote against any plans to start changing the R&D tax rules on July 1, 2010.

“This can’t be rammed through Parliament just to suit the timetable of the Government,” she said. “It needs a detailed look and examination.

“They can’t make the claims they’ve made about the impact of the legislation because they haven’t done any modelling and it’s been done purely from a revenue perspective from The Treasury and the Australian Taxation Office.”

Mirabella also backed calls by Deloitte’s tax expert to delay implementation until 2011.

“I’m not going to support a re-drafted bill that is only half as bad as the previous one,” she said. “Pushing a compromise at such short notice would be a disaster. It does not appear to have dealt with many of the significant concerns that have been raised with me.”

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Tags DeloitteR&D tax legislation

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