Treasury Laws Amendment (Research and Development Incentive) Bill 2018: Response to the Consultation

This submission to Treasury responds to the consultation on the Treasury Laws Amendment (Research and Development Incentive) Bill 2018, informed by the Issues Paper and a consultation meeting in Melbourne on 17 July 2018. Research Australia supports the proposed exemption of clinical trial expenditure from the $4 million cap on the refundable R&D Tax Incentive, noting the cross-portfolio effort governments have made to attract clinical trials to Australia. It is concerned, however, that adopting the Therapeutic Goods Administration definition of a clinical trial may exclude medical devices and newer interventions, and proposes a broader definition such as that used by the World Health Organization. Although the rate cuts are government policy rather than part of the consultation, it maintains that the R&D Tax Incentive should not be reduced until its economic impact since 2011 has been evaluated, which may take several years, particularly given an unexplained recent fall in private sector R&D. It rejects the argument that lower company tax rates offset the cut for small companies, since many receiving the refundable offset are loss-making and pay little or no income tax. It notes that the Government has not adopted Innovation and Science Australia’s proposed funding floor of 0.63% of gross domestic product, and recommends that any rate reduction apply from the next financial year rather than the current one.