R&D Tax Credit Exposure Draft Commentary

MJA's managing director, Kris Gale, has labelled the proposed R&D Tax Credit 'overreaching and restrictive' in a recent article on the ARN website. In the article entitled "Firestorm of criticism against Government R&D changes", MJA's Gale says

"If these changes go through, this will be the worst environment for Government support for R&D in this country for the past 25 years."

"The double whammy is a much tighter definition of what R&D is - whenever that R&D generates a commercial return, you are penalised and lose the credit completely."

Gale hopes the Government's proposal would be squashed due to mounting anger and scepticism from a range of businesses and organisations.

To read the article in full go to the ARN website.

Further information on the proposed R&D Tax Credit and MJA's submission to the consultation process can be found on the MJA website.

R&D Tax Credit Exposure Draft Legislation Released

The exposure draft legislation for the proposed new R&D Tax Credit has been released. While the news is not all bad, the new R&D Tax Credit proposed by the Treasury seeks to legislate a considerable narrower definition of R&D coupled with augmented feedstock provisions that would combine to remove any real incentive effect at the critical phases of all R&D projects - the times where decisions are made as to how much expenditure to commit to a project. Along with this minimised incentive effect, the new legislation introduces a slew of new concepts and requirements that add a huge amount of complexity to the program, couching it in language that is confusing and not relevant to technical personnel and again dropping the responsibility for the claim squarely in the lap of the company's taxation team.

In short, it is an incentive designed to encourage companies to do R&D outside their normal operating environments and only reward failures which can only be determined after the fact. It is not interested in assisting companies that seek successful R&D outcomes in commercially-driven environments.

The Treasury has given interested parties until 5 February 2010 for responses to be submitted. Further information on the proposed changes can be found on the MJA website. And as always, we are happy to discuss any questions and concerns that you may have. We will keep you updated regularly on progress.

In the meantime, we wish you all the best for the Christmas season and for a very successful 2010.

R&D Tax Credit Exposure Draft Expected Soon

The exposure draft for the new R&D Tax Credit legislation is still expected to be available towards the end of November according to Kris Gale, Managing Director, Michael Johnson Associates. Kris made the comment on “At The Open” on Sky Business Channel earlier today.

The program focused on the concerns that have been raised by the recent Treasury consultation paper’s proposal to change the definition of R&D. It was noted that the delays in the delivery of that paper have caused many to conclude that the recent public submission process may have little impact on the draft legislation. These concerns have been heightened by recent revelations that a number of public servants involved in the consultation process to date have moved on.

Details regarding the contents of the exposure draft will appear in an MJA Update as soon as they become available.

Big trouble in small business: R&D tax incentives

MJA's managing director, Kris Gale, was quoted in the business section of today's Australian outlining his concerns. In an article entitled "Big trouble in small business: R&D tax incentives", MJA's Gale says:

"These changes will (affect) technology start-ups more than large companies, which only spend 1 per cent to 2 per cent of their operating budgets on research compared to 30 per cent to 40 per cent for small companies, which are focused almost entirely on commercially ready R&D"

"Companies will need to divert extra resources to prepare their claims and that is an increased compliance burden and a diversion away from what they are trying to focus on. There is universal agreement that this will add complexity"

"The jaundiced view is that the legislation is already written and Treasury is just paying lip service to business views"

"Although small business and tax specialists say the R&D tax credit has the potential to significantly help small business, it will need to be refined to do so"

"If not, it runs the risk of leaving us with a lame duck program and all the uncertainty that presents"

To read the article in full go to The Australian website.

Further information on the proposed R&D Tax Credit and MJA's submission to the consultation process can be found on the MJA website.

R&D Tax Credit Issues Paper - Window For Responses Closing Rapidly

Submissions regarding the Treasury consultation paper, "The new research and development tax incentive”, close on Monday, October 26.

The public consultation sessions were completed in Sydney on Monday. It seems apparent that an Exposure Draft of the legislation is already advanced and is likely to be released next month. This makes submissions vital if you are concerned by the direction taken in the Treasury paper. The time to raise your issues is NOW.

If you require assistance, please contact MJA via the website.