Australian venture capital leader warns on R&D changes

BUDGET 2018 >>

MANAGING partner of Australian venture capital group OneVentures, Anne-Marie Birkill, has opened up wider discussion on the treatment of research and development after the changes announced in the 2018 Federal Budget.

“We are strong advocates for the R&D tax incentive, believing it provides capital constrained, research intensive companies like those in our portfolio with important funding to ensure they achieve their R&D objectives,” Ms Birkill said.

“We have many examples of companies that have continued to undertake R&D in Australia rather than moving to less expensive jurisdictions because the R&D tax incentive makes undertaking R&D in Australia economically viable.  

“Ideally, we would prefer there was no cap for research intensive companies however, we are realists and understand the government cannot have an uncapped and ever-expanding obligation.

“But one of the things that seems to have escaped commentary is that the R&D tax refund funds job creation – and those new employees pay tax; often at high rates as these are highly skilled roles.

“This means that the R&D tax refund is significantly offset by PAYG tax. And of course, there are all the other benefits of more R&D being done in Australia – including wealth and asset creation.”

The Federal Government announced changes to the R&D tax incentive that come into effect from July 1 this year.

A $4 million annual cap will be introduced on cash refunds for R&D claimants with aggregated annual turnover of less than $20 million. Amounts that are in excess of the cap will become a non-refundable tax offset and can be carried forward into future income years.

To be excluded are R&D tax offsets for clinical trials, from the $4 million cap on cash refunds, recognising the critical role of R&D expenditure on clinical trials in developing life changing drugs and devices.

The refundable R&D tax offset is to be amended so it is a premium of 13.5 percentage points above the claimant's company tax rate for that year.

OneVentures has been directly and indirectly contributing to the debate on Australia’s R&D tax system for several years, largely through its membership of the Australian Venture Capital and Private Equity Association Limited (AVCAL). Ms Birkill is a director of AVCAL and a member of its VC working group.


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