“Nearly five months after the Federal Budget, the Government still hasn’t got the tax reform package right, which will penalise innovative and R&D-active businesses in Australia,” said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
“While we welcome the Government adopting simplifications we requested to the Innovative Business CGT Concession (IBCC), a new and additional problem has been created – a clawback provision, which was inserted during the latest round of drafting.
“We have written to Treasurer Jim Chalmers to raise the issue and hope he will consequently reconsider this part of the legislation.
“The issue arises due to a ‘disqualified assets’ rule, which means that an investor in an IBCC company will see its eligibility for a CGT concession withdrawn if the company subsequently ceases being predominantly oriented to innovation.
“In practical terms, it means the CGT discount is of little value for early investors in innovative startups which successfully commercialise then exit the IBCC scheme.
“On the Research and Development Tax Incentive, we welcome the increased generosity in some parts of the program, but we oppose imposing arbitrary age limits on scheme access and the proposal to remove supporting activities from eligibility. These proposed measures result in net cuts to the program, and move it out of step with similar schemes in competitors (New Zealand, United Kingdom, Canada, Singapore) thereby diminishing our investment attractiveness.
“By treating them as a package, they result in less favourable tax treatment for businesses engaged in R&D and/or innovation in Australia. In net terms the improvements proposed by Treasury are now of less value to innovative companies and it means the scheme is of diminished relevance to Australian businesses.
“Overall, there is still a long way to go with this package and we urge the Government to seriously consider the impacts these changes will have on innovation and entrepreneurship. As things stand, that innovation and entrepreneurship will simply escape overseas to countries that embrace it. We are already seeing innovative businesses plan their departure from Australia if our tax settings remain relatively unwelcoming to entrepreneurs, innovation and research,” Mr Willox said.
Read Australian Industry Group’s submissions:
- Innovative Business CGT Concession – exposure draft legislation
- Better targeting the Research and Development Tax Incentive – exposure draft
