Labor scraps opposition to R&D Tax cut

Policy

Disappointment for the sector with Labor scrapping its previous opposition to the Coalition's cut in the value of the R&D Tax Incentive and announcing plans to wind back support for industry growth centres.

The Coalition announced the cut to the popular tax incentive in the 2014-15 Budget. The measure will reduce the rates of the refundable and non-refundable tax offsets available under the R&D Tax Incentive for the first $100 million of eligible expenditure by 1.5 per cent. The refundable rate will drop from 45 per cent to 43.5 per cent and the non-refundable rate will drop from 40 per cent to 38.5 per cent.

The measure, which the Parliamentary Budget Office recently said would generate savings of $1.03 billion over the years to 2019-20, had failed to navigate the parliamentary approval process with Labor combining with the Greens to defeat the measure. It has previously described the proposal as "reckless".

Labor announced its backdown as part of its 'Plan for Budget Repair' released late last week, saying its decision to back the cut will deliver savings of $2.8 billion over the next decade.

AusBiotech has expressed significant concern over the cut.

The Turnbull government announced a review of the The R&D Tax Incentive program in December last year as part of the National Innovation and Science Agenda.

The Review is being conducted by Mr Bill Ferris AC, Chair, Innovation and Science Australia, Dr Alan Finkel AO FTSE, Chief Scientist of Australia, and Mr John Fraser, Secretary to the Treasury.

In a recent joint submission with Research Australia, Medicines Australia, the Association of Australian Medical Research Institutes, BioMelbourne Network and BioSA, AusBiotech called for preservation of the program, arguing it is providing additional R&D in Australia and spillover benefits. They also called for an end to constant tweaks and reviews that are causing instability and uncertainty.

Labor said it will use the findings of this review to consider whether there are "more appropriate options" to amend the R&D Tax Incentive to achieve the same level of budget savings.

Labor also announced plans that it said will "reform and refocus" the Industry Growth Centres program.

The program was announced in 2014 with $248 million in funding over the four years from 2015-16 to 2018-19. Its goal is to engage and involve industry in the development of strategic visions for six sectors identified as priorities: advanced manufacturing; cyber security; food and agribusiness; medical technologies and pharmaceuticals; mining equipment, technology and services; and, oil, gas and energy resources.

The medical technologies and pharmaceutical growth centre was recently renamed MTP Connect. Experienced industry executive Sue MacLeman was appointed CEO in April this year.

Labor said contracted core funding for individual growth centres will be maintained through to 2019-2020 and that "all existing contracts and committed funding will be honoured."

However, it said they have failed to attract any real industry investment or research buy-in. Labor said they will be reformed and tasked with "providing sector specific blueprints to government for growth and investment."

"This expenditure saving will improve the budget by $117.4 million over the forward estimates, and $496.4 million over the medium term," it said.