Minister for Innovation, Industry, Science and Research Kim Carr has labelled the Coalition's plans to retain the current R&D tax concession a "huge cop-out".
In the Coalition's innovation and research policy (PDF), released just days out from the Federal Election, the party announced it would retain the current tax concession policy over Labor's proposed tax credit scheme.
This policy consists of a tax deduction of up to 125 per cent of expenditure incurred on R&D activities. Businesses can also receive an additional 175 per cent Premium Tax Concession if they had been eligible for the 125 per cent concession for the last three years and had increased their R&D expenditure above the average spend in that time.
Carr said the Coalition's policy would deny businesses greater access to cash funds.
"The Coalition has chosen to stick with a system that Medicines Australia has labelled not only as 'outdated, unpredictable and overly complicated', but also as internationally uncompetitive," he said. "The Coalition has not put forward a single idea to strengthen Australia's venture capital market."
Labor's proposed credit system is a 45 per cent refundable R&D tax credit to organisations that are not more than 50 per cent owned or controlled by a tax exempt entity and have an aggregated turnover of less than $20 million per annum. All other companies receive a 40 per cent non-refundable R&D tax credit.
The legislation for this new scheme was entered into parliament in May as part of the Tax Laws Amendment (Research and Development) Bill but had not been passed prior to the calling of the Federal Election.
In its policy document, the Coalition describes the credit scheme as "deeply flawed", saying that maintaining the concession scheme for another year will "restore funding, certainty and consistency to Australian R&D tax system", but the party did not rule out moving to a credit scheme after that.
The Australian Information Industry Association has identified reform of the scheme as a high priority, noting in its election manifesto that a change in R&D tax policy would "make Australia a more attractive destination for entrepreneurs, R&D development and ICT-related business investment".
The cost for continuing the R&D tax concession scheme is not laid out in the Coalition's policy documents, but the party has committed an overall $254.75 million to the industry, innovation and science initiatives outlined in the policy.