• Service: Tax, R&D Incentives, Topics, Federal Budget
  • Type: Business and industry issue, Regulatory update
  • Date: 13/05/2014

Tax Insights

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David Gelb

David Gelb
Lead Partner, R&D Incentives

+61 3 9288 6160

Federal Budget 2014: R&D funding 

by David Gelb, National Partner, R&D Incentives

It is a huge disappointment to see a 15 percent Budget cut to the R&D tax incentive for the 2014/5 financial year and 10 percent for small and medium enterprises (SME).

It comes as a complete surprise and contradicts the government's purported support for R&D and innovation. Such a reduction in funding is likely to reflect poorly upon us internationally, lessen Australia’s innovation credentials, and increase the cost of domestic R&D - thereby driving R&D activity offshore where it will be undertaken in the most after-tax cost effective country.


Last year, when the government proposed restricting R&D relief for the largest 20 Australia companies, the French Minister for Innovation invited them to undertake their R&D in France. The UK too has expanded its R&D program in recent years, during a tough economic period as the promotion of R&D assistance across all sectors is considered as beneficial to the economy.


Innovation is a dominant factor in economic growth and patterns of world trade. There is considerable global evidence that innovation is not just beneficial to the company concerned but creates spin-off effects in local supply chains, and flow-ons to employment. This explains the crucial nature of innovation hubs.


Government policy in the 21st century must do all it can to foster and facilitate this kind of win-win situation. Effective tax policy is crucial to this, though it is only one element. In a recent Australian Industry Group survey, 39 percent of respondents had stronger R&D tax concessions in their top three budget priorities.


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