In a period marked by declining business research and development (R&D) investment in Australia, the Australian Industry Group has expressed significant concerns regarding the Australian Taxation Office's (ATO) new reporting requirements for the R&D Tax Incentive.
Business R&D investment fell to 0.89% of GDP in 2021-22, the lowest rate in 20 years. This decline has seen Australia drop from 12th to 19th place in the OECD R&D ranking, now performing lower than all G7 major economies. The ATO's decision to share the details of 11,545 companies using the R&D Tax Incentive, a program already known for its complexity and uncertainty, has made it even less appealing for businesses.
Innes Willox, Chief Executive of the national employer association, the Australian Industry Group, stated: "It is telling that this data reveals that of the $20.6 billion of business R&D conducted in 2021-22, only 54% was subsequently claimed to the ATO under the R&D Tax Incentive. This low utilisation rate points to design inefficiencies that are preventing our R&D-active businesses from properly accessing the R&D Tax Incentive.
"While we fully support transparency in the allocation and utilisation of government funding, the effectiveness of the new reporting requirements in enhancing program compliance remains questionable. If the ATO is aware of the entities engaging in non-compliant activities, it should take direct action against these bad actors rather than sharing the details of participants in the program."
Mr Willox further added: "Ironically, the new reporting requirements may inadvertently benefit the bad actors the ATO aims to eliminate. By providing a detailed 'shopping list', the ATO has potentially armed these entities with the information needed to navigate and exploit the system further.
"We are committed to working closely with our members and, as the Strategic Examination of Australia's R&D System progresses, we will actively engage with stakeholders to advocate for a more effective and less burdensome compliance framework," Mr Willox concluded.
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