Manufacturing News

Industry questions proposed R&D tax incentives

The Australian Industry Group says it is sceptical about the new R&D tax offset proposals recently announced by the Federal Government.

Heather Ridout, Chief Executive Australian Industry Group, said, “While the Federal Government has made a number of important amendments to the proposed R&D tax incentive legislation due to take effect from July, at first blush the changes are not likely to go far enough in allying industry concerns that the new scheme will undermine business expenditure on research and development.

“We welcome a number of the new proposals which clearly pick up on some of the pitfalls evident in approach previously put forward by the Government.

“These include the proposed definition of eligible R&D expenditure, the augmented feedstock provisions, the dominant purpose test for all supporting expenditure and the highly constrained treatment of software. These areas were among Ai Group’s leading concerns,” Ridout said.

“In meeting some of these concerns the new draft legislation takes a different tack and introduces a number of new legal concepts. The new approach will need thorough examination before the full implications for business are understood. In our experience it will be very difficult to evaluate these questions in the time available for comment (by 19 April).

“Bearing in mind that businesses are right now planning their R&D expenditure for the next financial year, it is highly doubtful they will have time to determine whether or not their intended investments will meet the new eligibility criteria.

“While we have these strong reservations, Ai Group will work closely with our members to provide constructive feedback on the workability of the new approach.

“Ai Group has previously suggested the Government postpone changes to the eligibility rules until 2011 to allow more thorough examination of alternative approaches. While we will look closely at the latest proposals, at this stage we still favour the more considered approach,” Ridout said.

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