In brief 

On the 9 February, the Tax Laws Amendment (Research and Development) Bill 2013 returned to the Senate for the second reading debate and passed in the affirmative, by 34 votes to 31. The Bill passed with two amendments with the following effect: 

  • revise the start date of the changes to income years commencing on or after 1 July 2014 (opposed to the original date of 1 July 2013), and
  • replace the $20 billion turnover threshold with a $100 million R&D annual spending cap

In detail

Whilst PwC is disappointed with any cuts to innovation funding and support to the incentive program, we view the amendments as a positive outcome relative to the original measures proposed. The original Bill would have completely excluded 15-20 of Australia’s largest innovating companies from accessing the R&D Tax Incentive. Under the amended Bill passed early this week, companies will still be able to access the program to support their R&D to an annual cap of $100 million of eligible expenditure. This is fairer and more equitable than the original proposal. Furthermore, the revised start date will prevent an estimated additional $300m in cuts that would have been seen under the original start date of 1 July 2013.

However other amendments were put forward during the second reading which were not included in the final Bill, including:

  • introduction of a quarterly credits system to allow refunds to be issued on a quarterly basis, and
  • revising the start date to income years commencing on or after 1 July 2016. 

Separately, the Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014, which encompasses the Government's proposed changes to reduce the offset rate by 1.5 cents, remains on the agenda for debate in the Senate. The mood in Canberra is that this Bill will not come before the Senate for debate and a vote until March 2015. PwC will continue to follow the passage of this amendment so keep an eye out for more alerts where we will update you on the outstanding Bill.