Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

Given that the Labor Party is so reckless and irresponsible and is not supporting its own budget measures, we have worked with Senator Wang and the Palmer United Party, and other crossbench senators, to come up with a different way to achieve the same policy objective. Of course, we are not yet dealing with the amendments of the Palmer United Party. But given that it is a wide-ranging debate I am quite happy to go to that point now. The Palmer United Party has proposed amendments to the bill which would delete the original measure and, instead, introduce a cap of $100 million on the amount of eligible research and development expenditure that companies can claim at the standard rate under the research and development tax incentive. For expenditure beyond $100 million, companies would claim a non-refundable tax offset at the corporate tax rate, which is broadly equivalent to claiming a normal deduction. Under an expenditure cap, Australian and foreign-resident companies would continue to be eligible for the research and development tax incentive and continue to receive a substantial tax benefit. This would address crossbench concerns about the perceived discriminatory effect of the original measure on Australia-resident companies. A research and development expenditure cap of $100 million would also achieve revenue gains approximately equal to the revenue gained from the original measure contained in the bill. This ensures that the changes will still play an important part in the budget repair effort.

The crossbench amendments to the bill also include consequential amendments, which we can discuss later. But the important point here is that the Palmer United Party engaged constructively with the government. Senator Xenophon, Senator Madigan and other crossbench senators, including Senator Muir, said to the government, 'We understand what it is that you're trying to achieve. We agree with the principle, but we are concerned that this will impact disproportionately only on Australian companies and less so on companies that are predominantly operating overseas.' So by introducing a cap on the level of research and development related expenditure that is eligible we are achieving the same objective. But whether you operate predominantly in Australia and generate your profits predominantly in Australia or whether you generate your profits predominantly overseas, you are treated the same way for the purposes of this particular measure. We think that is a sensible improvement that has been put forward by the Palmer United Party.

If I might here thank Senator Zhenya Wang very much for the very constructive approach he has taken and for the hard work of his staff as well, who have been working with my office in trying to come to a sensible landing point that helps us not only achieve the policy objective and the saving but achieve the saving in a better way than was originally intended. Let me just say, again, that the original measure of course was the measure put forward by the Labor Party during their last period in government.

The CHAIRMAN: The question is that amendment (1) on sheet 7542, moved by Senator Milne, be agreed to.