Leader of Deloitte’s research and development (R&D) tax practice, Serg Duchini, welcomed the Government’s review of Australia’s national innovation system and, has suggested some alternate policies that have been introduced overseas to support and enhance corporate investment in R&D.

“The R&D tax concession in its current form is almost 22 years old and although recent amendments have broadened its impact, there is still scope to improve its effectiveness to reflect the challenges currently facing Australia better,” Mr Duchini said.

Mr Duchini said Deloitte has reviewed the R&D tax concession polices of 37 countries and there are various alternative policies, including:

• providing tax credits for eligible expenditure compared to increasing the currently available tax deduction
• providing R&D benefits that do not adversely affect the franking account balances of Australian corporates
• providing a volume-based R&D concession compared to the current hybrid (incremental and volume based) benefit
• providing a solely incremental-based concession
• assessing and broadening the current legal structures that enable access to the concession
• assessing the effectiveness, in an increasingly competitive global market place, of current location rules that require eligible R&D activities to be conducted within Australia or an external territory
• assessing the effectiveness of the current intellectual property (IP) requirements for Australian R&D that require the IP to be effectively owned by the Australian corporate in order to access the 125% R&D concession
• providing greater clarity for Australian corporates undertaking R&D on a contracted or collaborative basis
• improving the support for small business by reviewing current turnover and thresholds limits
• providing more focused concessions for activities of national or global interest, for example alternative energy and greenhouse reduction technologies
• simplification both in terms of administration of the tax concession and the calculation of entitlements, particularly in larger Australian corporate groups.

“As well as assessing whether the rate (currently 125% and 175% premium) of the concession is adequate to support corporate R&D activity in Australia, some of these alternatives should be considered as part of the review.

“If we don’t have policies in place to position us competitively in the global R&D market place, then Australia risks investment dollars going overseas.

“Countries like China, Canada, the US, the UK, South Africa and New Zealand are actively chasing the same R&D investment as Australia and have recently introduced and or enhanced their R&D regimes to remain competitive.”

Mr Duchini said this is a welcome initiative by the Government and he encouraged all stakeholders to contribute to the debate on the development of new policies.

“Deloitte looks forward to making a positive contribution to this important review,” Mr Duchini said.