Senator the Hon Mathias Cormann

The Government has been able to secure another important Budget saving in the Senate with the successful passage of the Tax Laws Amendment (Research and Development) Bill 2013.

This measure was initiated and banked by Wayne Swan and the Gillard Labor government in their 2013-14 Budget, but never legislated.

Now in Opposition Labor opposed their own saving.

If this Labor saving had failed to pass the Senate, it would have cost the Budget $1.35 billion over the current forward estimates.

The introduction of a research and development expenditure cap of $100 million secures an improvement to the budget bottom line broadly equivalent to that of the original Labor measure contained in the Bill, which would have instead removed access to the research and development tax incentive for companies with aggregated assessable income of $20 billion or more.

These changes represent a fair and sensible outcome, providing a concession for small and medium sized companies which are typically more responsive to tax incentives for innovation while at the same time ensuring that important savings in the Budget are realised.  

The Bill introduces a cap of $100 million on the amount of research and development expenditure that companies can claim as a tax offset under the research and development incentive.

For expenditure above $100 million, companies will be able to claim a tax offset at the company tax rate.

Fewer than 25 companies are expected to be affected by the new measure. The vast majority of companies claiming the research and development tax incentive will be unaffected. 

The amendment will take effect from income years beginning on or after 1 July 2014, one year later than previously announced by the former government. This start date recognises the uncertainty facing companies following the considerable delay in legislating the original measure announced by the former government in February 2013.

The impact on the Budget from the delayed start date is a reduction in revenue of $300 million over the forward estimates.

The Senate’s agreement to this Bill is another contribution to the Government’s efforts to repair the Budget.