Senate votes down change to R&D tax break

The Senate has voted down a Government budget proposal that would have reduced research and development tax breaks by 1.5 per cent.

As the SMH reports, Labor and the Greens joined forces to defeat the bill which the Government had claimed would have resulted in savings of $620 million over four years.

However, following a deal between the Government and the Palmer United Party last month, the amount on which companies can claim R&D tax breaks will be limited to $100 million.

Opposition innovation spokesman Kim Carr (pictured) said the change would have had a great impact on small to medium enterprises, which make up a large proportion of those involved in the scheme.

"The passage of this Bill in its current form would further degrade the R&D tax incentive, which is one of the most important mechanisms available in the taxation system to foster innovation," said Carr in the Senate on Monday night.

"Without a strong innovation system, Australia cannot build a more diverse economy, and if we do not build a more diverse economy, we cannot protect living standards and we cannot ensure that prosperity is spread throughout our population," he said.

Carr’s views were echoed by Sukvinder Heyer, National Head of Research & Development Tax, Grant Thornton Australia.

“This is positive news for many mid-size businesses for whom the reduction in the rate would have meant an actual cash decrease. In innovation, every dollar counts, so to have certainty that the rates will remain as they are, is very welcomed,” he said in a statement.

“What remains to be seen is the impact of the introduction of the cap on expenditure. This measure has the potential to push R&D offshore because the margin provided by the R&D tax offset to large companies is diminished. 

"This could stifle activity in the local technology, life sciences and manufacturing sectors by taking away opportunities to be involved in leading developments.”