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ISA Annual Report 2017: R&D Tax Incentive Outcomes

ISA Annual Report 2017: R&D Tax Incentive Outcomes

Ramanie Naidoo and Melissa Nikolic discuss key highlights from ISA’s 2017 Annual Report.

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In December 2017, Innovation and Science Australia (ISA), formerly Innovation Australia, released its 2016-2017 Annual Report. It was with particular anticipation to see the results of the Research and Development (R&D) Tax Incentives program, following on from the recommendations made by an external panel regarding the program in 2016 (the 3F Report).

The key highlights from ISA’s 2017 Annual Report are:

  • Overall increased R&D activity with a record 13,567 companies registering for the program for the 2015-2016 income year. This is an increase of more than 300 R&D entities or 3.1 percent overall.
  • Growth of 5.1 percent year-on-year in those accessing the refundable R&D tax offset (companies with aggregated turnover less than $20 million).
  • An increase of $6.10 billion (up by 5.3 percent year-on-year) in R&D expenditure by companies accessing the refundable R&D tax offset (small and medium enterprises (SMEs) and startups).
  • More than 3,400 new applicants to the program during the 2015–16 income year (22.2 percent of total R&D entities).
  • Launch of the R&D Tax Incentive e-learning module for accountants and tax agents intended to teach R&D Tax Incentive fundamentals to non-R&D specialists. The e-learning module was accessed 2,316 times during 2016–17. 
  • A number of decisions by the Administrative Appeals Tribunal (AAT) in relation to the R&D Tax Incentive.

It is pleasing to see this increase in R&D Tax Incentive Program participation and particularly from the SME sector. It will be interesting to monitor whether there will be an increase in reviews and other compliance activity by AusIndustry and the Australian Taxation Office (ATO) commensurate to this surge in uptake as described in the 3F Report. That review, which sought submissions from various stakeholders, concluded that this increased uptake may lead to a corresponding increase in compliance activity to ensure the program’s integrity.

Looking ahead, ISA’s recent publication entitled ‘Australia 2030 Prosperity through Innovation: A Plan for Australia to thrive in the global innovation race’ provides further insights into potential changes to the R&D landscape.
 

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