R&D tax scheme delayed, resolution unlikely until new parliament begins

The Government’s new R&D tax credit is now unlikely to pass through Parliament until August with the existing Senate likely to block the bill, causing uncertainty among SMEs which may alter their R&D spending as a result.

Institute of Chartered Accountants tax counsel Yasser El-Ansary says the delays have put the Government’s proposal to have the laws apply from all spending from July 2010 onwards into jeopardy. He says the Government should instead confirm the laws will apply from July 1, 2011.

“It’s not looking good for the R&D credit. I know industry minister Kim Carr has been forcing the issue that the new credit will apply from July 1, 2010, but realistically there are a lot of problems with that approach.”

“The first is that bringing legislation into parliament, there are still many things the Senate clearly wants to debate about. The second problem is that tax law is highly unusual and complex and it isn’t desirable to pass laws with retrospective applications.”

The new laws will provide SMEs with turnover less than $20 million 15c in the dollar for R&D spending, while companies with turnover over $20 million will receive a 10c in the dollar benefit.

The Government hoped to have the legislation passed earlier this year, but the law was stalled. And while Carr says the legislation will apply retrospectively from July 1, 2010, Ansary says the longer the bill is delayed the more that situation becomes unlikely.

“Taxpayers simply can’t make decisions on their businesses without some certainly and passing retrospective laws impacts decisions they have already made.

“The longer the delay occurs the more likely it is the legislation won’t hit parliament until the end of the year, and there’s no certainty about positions on the bill either.”

Instead, he says the most sensible and logical path would be for the Government to confirm the changes will apply from July 1, 2011. He argues this would allow SMEs to play on their R&D spending with the new parliament given time to debate the measures fully.

Until July next year, the Liberals will control the senate and all signs indicate they want a vigorous debate.

A spokesman for opposition industry spokeswoman Sophie Mirabella told SmartCompany the party hasn’t changed its position and says that, “hopefully the Government has listened to many concerns of industry and might be introducing the bill with some necessary amendments”.

“The other problem exists is the retrospective nature of the legislation. People need to have certainty around this…and we think it makes much more sense to have the laws apply from July 2011 which gives more time to run an education campaign and deliver certainty.

Carr was contacted for comment this morning, but was unavailable for comment.

It is also understood the Greens have sought out details on how the new R&D tax credit will work, while Family First Steve Fielding also signalling his opposition to the changes. He continues to be a key player in the senate and has previously said he will pose a threat to any Government legislation.

“The senate ought to be allowed to run its course,” Ansary says. “They should be allowed to debate the bill fully and only when that process is completed should the reforms be voted on again.”

“But the notion of applying the laws retrospectively and assuming that businesses will be allowed to make sense of the draft legislation before it comes into law on its own, it doesn’t make sense.”