With the Australian federal election taking place this coming Saturday 21 May, and with neither major party assured of a majority, questions have arisen as to the likelihood of certain policies remaining in place moving forward.
One of these policies is a cornerstone of Australia’s economic development – the R&D Tax Incentive program. This is an incentive-based program that provides financial support to companies conducting R&D activities in Australia, by way of either a refundable cash rebate, or a non-refundable tax credit. The value of the R&D Tax Incentive is considerable – up to 43.5% cash refund on eligible R&D activities carried out in Australia – and it has directly encouraged many technology companies from a wide range of industry sectors to set up R&D centres in Australia.
The program has been in existence in various forms for around 30 years, though the Liberal-National Party (LNP) has unsuccessfully attempted to reduce some of the benefits available on two of occasions in the past decade by way of legislative reform. With a change of government, a high possibility on Saturday, and the additional likelihood of a minority government being sworn in, questions have naturally arisen as to whether the policy will remain in effect in its current form for the future.
Thankfully there is little indication that there will be much in the way of change. The release of the federal budget papers in March 2022 demonstrated that not only has the LNP abandoned its previous attempts to legislate amendments to the R&D Tax Incentive program, but it introduced additional benefits for companies conducting R&D in Australia, such as a patent box initiative. In addition, both the opposition Labour Party and the Greens have indicated strong support for boosting R&D in Australia, with additional strong support for the domestic tech industry and STEM education. In fact, if there is any party that appears to have less support for domestic R&D activity in Australia, it is arguably the LNP.
We believe, therefore, that irrespective of the outcome of the federal election on Saturday, it is almost certain that the R&D Tax Incentive program will remain unaffected. In fact, if there is a change of government – whether that government exists as a majority or a minority coalition – it may well be that there are additional benefits brought to bear on the R&D landscape in Australia. It is of course our strong view that supporting R&D activities in Australia, especially across all emerging tech sectors such as energy, space, fintech, life sciences, and AgTech – will position Australia for strong economic growth and leadership as we continue through the 21st century.