Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Hansard source

I thank senators for their contri­butions. As Senator Milne has indicated, this has arisen as a result of discussions. The government are not frightened of acknow­ledging that we are in the business of actually discussing issues of this complexity and importance when we want to develop new initiatives. This is a scheme that in the 1990s was attracting less than $300 million per annum in terms of support. It has now gone to a position where we estimate in the next financial year it will require support from the budget effectively of $1.8 billion per annum. This is a scheme that has attracted some 8½ thousand registrations for the overall operations of the R&D system in this country. Some might say that is a high number. I take the view that, given the number of firms we have in this country, which is well in excess of two million, 8½ thousand firms is a very small number.

The aim of this project is to get more firms to invest in themselves. We have seen that it is all too often the case that small firms, who are understandably preoccupied with the day to day, do not necessarily think about the implications of not investing in themselves. What we have tried to do with this program is double the level of support for small- and medium-sized enterprises to actually give financial incentives for businesses to invest in themselves. We have also increased support for large firms by an additional one-third.

This is not about reducing the level of investment in R&D. On the contrary, it is about expanding it. Senator Colbeck is quite right: this is an uncapped scheme. It is actually about building support and changing the culture of business in this country so as to ensure that there are higher levels of investment in R&D. The difference is that we cannot allow to go unchallenged the pattern of development that has occurred in recent years. The reason is that inappropriate claims and rorting of the taxation system have a serious detrimental effect on our capacity to administer sound government programs. We have occasions where large financial institutions have claimed their entire computer system as R&D. It is just not appropriate that that type of activity continue, because it will bring into question the authority and credibility of the whole scheme. In parts of the resources sector people are claiming the entire project—billion dollar claims—for R&D through the system, including roads and the walls of mines and projects that involve R&D on mining shafts. They claim materials removed from mine shafts and sold as R&D. That is just not on.

Senator, you made reference to 100 firms securing 60 per cent of what is the equivalent of $1.8 billion per annum. It is not the fact that there are only 100 firms; it is the fact that the 100 firms get 60 per cent of the benefit. They understand that. By the way, the claims of those 100 firms are controlled by four accountancy companies; hence, there has been this concern raised in some accountancy firms that they will now have to change their business model. They are anxious about that.

We say, 'Go out and change the way you do business; get new clients because we want to see more and more people invest in their own future and invest in R&D.' The accountancy companies will have to actually do their job properly. They might have to change their approach. This is one measure that came about as a result of the conversa­tions in three rounds of the consultation process involving over 700 companies. We were very concerned that there was proper discussion and proper consultation with real-world practitioners with a change of this importance and this was one scheme that came forward.

You raised a legitimate question: why have we waited till 1 January to introduce the quarterly payment aspect? That is on the advice of Treasury. That is how long it will take them to get their administrative systems in place. That is not to say that firms will not get the additional benefits; they will. It is just that they will not get the cash quarterly payments arrangements, but they will get the additional benefits provided by this legislation. Businesses will be able to choose whether from 1 January 2014 they continue to claim the research and development tax incentive at the end of the income year in which the research and development is undertaken or they apply for the quarterly payments that would deliver the benefits in the income year that the company undertakes the activities.

The quarterly credits will allow small and medium sized enterprises to choose an option which is best suited to their business conditions. This effectively means that providing quarterly credits will be deter­mined in the light of the experience with the operation of the new R&D tax incentive. Consequently, these amendments provide for the regime to be implemented through regulations. The amendments demonstrate that the government has in fact a clear commitment that a quarterly credits regime is to be part of the new incentive arrange­ments based on the real-life experience of firms participating in it.

I also put to you once again the assurance that we have built into this legislative framework of the review process through the R&D tax board. I have genuinely put that forward because I am concerned that, if people have issues about the way in which the administrative practices are undertaken, there is a process already built in to allow voices to be heard, ensuring that the policy intent is reflected in the administrative practice. With that, I trust the chamber is able to agree to these amendments.