The Abbott government has failed to pass a controversial budget proposal to reduce research and development tax breaks for all companies by 1.5 per cent.
The reduction in the rate was budgeted to provide a $620 million saving over four years but was voted down by Labor and the Greens on Monday night.
Opposition innovation spokesman Kim Carr said it was a “harsh, unfair and job-destroying measure [that] was based on a lie, and the Senate has rejected it accordingly”.
He said some of Australia’s biggest R&D investors – including companies such as Cochlear, CSL, Telstra and Caltex – had made it clear that constant tinkering with the tax break on R&D investment would cost jobs.
Greens deputy leader Adam Bandt said the Senate’s rejection of the $620 million in cuts was a “big win for science and research and a big win for business”.
“The Parliament’s rejection of these cuts is a step towards stemming the bleeding [to innovation],” he said.
Tax experts have welcomed the move to ditch the 1.5 per cent reduction in the tax offset but slammed the decision to limit tax breaks for companies spending over $100 million on R&D, and back date the change to July 1 last year.
As Fairfax Media reported, thanks to a deal with the Palmer United Party (PUP) last month, up to 25 Australian companies including Telstra, BHP and Rio Tinto will only be able to claim tax breaks for R&D spending up to $100 million.
Anything above that amount will no longer be eligible. The cap will apply retrospectively.
PwC tax partner Sandra Boswell said it could result in high-tech investment shifting offshore.
“It could mean that projects could move to more favourable regimes in the region, such as Singapore, Malaysia and Indonesia,” she said. “They all have R&D incentive programs and they are increasing them, not putting caps on it.”
She said she hoped the upcoming tax white paper would consider new incentives encouraging companies to innovate.
KPMG head of R&D incentives David Gelb said any proposal to reduce the R&D rate again needed to be coupled with a reduction in the corporate tax rate.
He said the affect of the cap would mean that companies which have this level of R&D spending and engage with smaller companies, universities and research bodies to undertake work for them would no longer be able to do so.
“This engagement with the broader community will be significantly impaired,” he said.
MPR Group partner Brendan Brown said despite the cap, he was pleased that small to medium businesses would continue to get existing tax breaks on R&D spending.
This story Administrator ready to work first appeared on Nanjing Night Net.