New R&D bill passes lower house, but independent senator still undecided

The Federal Government’s long-awaited R&D tax credit system has moved a step closer to implementation, with the legislation supporting the scheme passing the lower house of Parliament, almost five full months after the scheme was supposed to be in place.

Industry and Innovation Minister Kim Carr said yesterday that the Government had managed to secure the support of the four independent MPs and the Greens to get the bill through the lower house.

A spokesperson for Senator Carr said the Government expects the bill to be introduced into the Senate in the next few days, and Carr is calling on the Opposition to reverse its “obstructionist” stance against the bill.

However, a spokesman for independent Senator Nick Xenophon said he was yet to make up his mind on the bill and would be looking to consult with stakeholders before forming a view.

But the spokesman expects the bill will not come before the Senate until the New Year, given there are just three Parliamentary sitting days left and there are number of big legislative items on the agenda, including a key piece of NBN-related legislation that will allow for the structural separation of Telstra, and allow the NBN Co to complete an $11 billion infrastructure deal with the telco giant.

Xenophon is likely to find several sections of the business community remain opposed to the introduction of the tax credit scheme, which replaces the current R&D tax concession scheme.

While Carr says the tax credit scheme will help more SMEs access the $1.6 billion in annual R&D funding available under the credit scheme, the Australian Industry Group and accounting firms such as PwC says the criteria of the new scheme are too restrictive.

PwC partner Sandra Mason, has been particularly critical of the bill, which essentially says that eligible activities must be undertaken for the dominant purpose of R&D, and not commercial reasons.

She gives the example of a company that invents a widget and successfully takes it to market after extensive R&D. Two years later (a typical time lag in R&D tax claims), when a assessor comes to look at that claim and sees the widget has been a commercial success, Mason fears that R&D activity will be deemed to have been for the dominant purpose of commercial operations, not R&D.

Mason told SmartCompany this morning she would welcome the chance to talk with Xenophon.

“We continue to consult with all stakeholders and remain hopeful that some key amendments can be made to the Bill to remove complexity, such as the removal of the overly restrictive Dominant Purpose Test.”

“The ultimate aim is a workable program for business.”