Software sector gets a reprieve as Government changes to R&D tax credit

The software sector appears to have had its access to R&D tax breaks restored, with the Government changing its new R&D tax credit to allow software developers greater access.

Grant experts are still digesting the second draft of the Government’s new R&D tax credit legislation, which was released late on March 31, but Adrian Spencer of GrantReady says the software sector appears to be the big winner.

Peak lobby group the Australian Information Industry Association complained about a new multi sales test introduced under the original R&D tax credit laws, which required a piece of software covered under the grant to be available for multiple sale, is contrary to how much of the industry operates.

“This multiple sale test is at odds with new business models, such as companies developing software free of charge in iPhone apps, web-based software and so on. Under this new test these companies would be excluded from eligibility,” AIIA chief Ian Birks told SmartCompany earlier this year.

“There is just a general raising of the bar that is being put into place to stop people rorting the system. The unintended impact is that it will restrict businesses being given funds that they need.”

But the new draft removes this test and “adopts a more principles-based approach to software R&D”.

“Under the second exposure draft, most software R&D will be subject to the same rules as all other kinds of R&D. However, certain in-house software activities will be excluded from core R&D and will therefore be subject to the dominant purpose test for supporting R&D.”

Spencer says it is good news for the software development sector.

“I think it’s going to be a big relief for a lot of the software companies that can continue to do R&D and keep improving their products. “

“I think Wayne Swan has heard what people want and genuinely listened.”