As part of the National Innovation & Science Agenda, the Government has commissioned Innovation and Science Australia to undertake a review of the R&D Tax Incentive.
While Research Australia proposed some possible minor amendments to the R&D Tax Incentive, we argued that on the whole the R&D Tax Incentive is already performing well against the Review’s criteria of effectiveness, integrity and encouraging additional R&D. Any changes to the R&D Tax Incentive at this point in time should be limited to improving the way it is administered.
R&D Tax Incentive Review
As part of the National Innovation and Science Agenda (NISA) Treasury has undertaken a consultation on an initiative to provide tax incentives for early stage investors in innovative companies. Research Australia’s submission supports the proposal and suggests some amendments to improve its operation and reduce red tape. These include making registration for the R&D Tax incentive a qualifying condition for treating a company as an ‘innovation company’ in respect of which the tax incentive can apply, and allowing the tax incentive to be available to ‘retail’ investors. The tax incentive has the potential to increase the capital available to early stage innovative companies, including those seeking to commercialise new medicines, devices and therapies.
Tax Incentives for early stage investors
Private and Public Ancillary Funds allow individuals and organisations to create trusts that can receive tax deductible donations and then distribute these amounts to charities in later years. The Treasury proposed allowing Ancillary Funds to reduce the amount they must distribute to charities each year, and to link this amount to their investment returns. Health and Medical Research is a recipient of funds from Ancillary Funds.
Research Australia has opposed the changes because linking the funds to economic conditions and investment market performance could reduce the amount of funds made available and lead to greater year-to year-variation in distributions
Reduction in Minimum Distributions for Ancillary Funds