Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Innovation, Industry, Science and Research, Senator Carr. Can the minister inform the Senate on the government’s proposed research and development tax credit? What is the structure of the credit? How will it benefit Australian business, especially small business? How does it differ from the existing tax concession?

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

I thank Senator Cameron for the question and acknowledge his longstanding interest in these issues. The research and development tax credit is the most important reform to Australian business innovation support in a generation, and I am sure that Senator Fielding and Senator Xenophon would appreciate that it is essentially critical to small business.

It is not often that I applaud the judgment of the Australian Financial Review, but this morning’s headline says it all: ‘SMEs win in new R&D tax breaks plan’. There will be a 45 per cent refundable tax credit for companies turning over less than $20 million and a 40 per cent non-refundable tax credit for all other companies. The 45 per cent credit doubles the base rate of support available to small- and medium-sized enterprises from 7½c in the dollar to 15c in the dollar. That is equivalent to a 150 per cent tax concession. The 40 per cent non-refundable tax offset raises the base rate for large companies by a third, from 7½c to 10c in the dollar. It is equivalent to a 133 per cent tax concession. Small, innovative firms are big winners from the new R&D tax credit. They will enjoy more generous rates of assistance and better access to cash refunds for their R&D expenditure, and under the present arrangements a company in tax loss turning over $10 million and spending $1 million on eligible R&D might eventually receive a tax deduction of $375,000 when it turns a profit. Under the new scheme— (Time expired)

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Can the minister explain to the Senate why action is needed to replace the present research and development tax concession? Is the concession being used inappropriately? Are there problems with the definition and interpretation of research and development?

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

As I was indicating, under the new scheme, benefits in the case I mentioned are increased from $375,000 to $450,000, so it is a major reform to extend R&D support to a new generation of companies that unlocks creativity right across the economy. The R&D tax concession is a great Labor reform and, of course, in its day was obviously a matter of urgent need, but it is now time for a replacement. Those opposite halved its value and ignored the problems that emerged over time in its administration. They have a legacy whereby a mining company that does $20 million worth of R&D is able to claim $500 million for normal mine operations and mineral exploration associated with R&D. They might have a situation under present arrangements where a construction company that does $15 million worth of R&D on air-conditioning systems can potentially claim the $100 million cost of construction of a whole building on the grounds— (Time expired)

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a further supplementary question. Can the minister advise the Senate of what industry is saying about the government’s proposed R&D tax credit? Have the government reforms been welcomed by innovative firms and knowledge-intensive industries?

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

What these measures are about is providing innovators with a real opportunity to innovate. AusBiotech says:

The biggest winners will be those companies with turnover of less than $20m with no commercial production yet, which are able to cash out the refundable credit if in tax loss.

Deloitte, for instance, say:

The software rules are … in many ways better than what we have now.

TGR BioSciences are saying that it is ‘absolutely’ a crucial reform. Of course, my new best friends at the Australian Financial Review point out:

The government also made it easier for most software to qualify for the tax break …

What we have seen is the Institute of Chartered Accountants Australia saying:

It’s clear the Government is focused on rebalancing and retargeting the R&D tax credit for the SME market, rather than the big end of the market.

This is precisely what we are doing. (Time expired)

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Mr President, noting that friends can be fickle, I ask that further questions be placed on the Notice Paper.