The Council of Australian Postgraduate Associations (CAPA) welcomes some of the key proposals in this review of the R&D Tax Incentive. The R&D Tax Incentive is the largest component of the Australian Government’s support of research and development activity in Australia. It is also projected to grow strongly over the forward estimates as more companies access the scheme, advised by tax consultants at the Big 4 professional services firms. This obvious rort creates an environment which not only harms the budget bottom line but does little to encourage genuine additional R&D expenditure by private sector firms.
CAPA is particularly supportive of the proposal to increase the rate of the incentive to firms which employ new PhD graduates for up to 3 years. This proposal sits well with the established literature of technological innovation in the private sector in that it incentivises the development of human capital within firms. CAPA is also of the view that this measure, along with the additional support rate for collaboration with public research organisations will result in better aligned incentives to improve the rate of STEM PhD employment in private sector firms, which would bring significant spillover benefits into the internal research and development culture within SMEs.
CAPA also supports the introduction of measures to improve the integrity of the scheme by bringing in a two million dollar cap to the cash refundable portion of the tax incentive and the intensity threshold to large businesses. Both of these measures will serve to improve public confidence in the scheme, reducing the incidence of tax minimisation and ensuring that genuinely additional R&D expenditure is supported by the public purse.
CAPA National President Jim Smith said, “PhD graduates play a central role in the development of a collaborative research culture within the private sector around the world. For Australia to increase its rate of technological innovation and business-industry collaboration, carrots to both the private and public research sectors have to be aligned. The introduction of the measures recommended in this review will serve as an effective and genuine incentive to private sector firms, particularly SMEs, to increase their real R&D expenditure in collaboration with public research organisations.”