Budget 2020: Federal government backflips as R&D tax incentive receives AU$2b boost

CSIRO was also handed AU$459 million, while researchers at universities will benefit from a AU$1 billion injection on a day when the government gets support to raise fees to attend universities.
Written by Aimee Chanthadavong, Contributor

In handing down its 2020-21 Budget, the Australian government has opened its wallet to provide a AU$2 billion boost in additional research and development tax incentives (RDTI), touting that the amount will help businesses manage the economic impacts of the COVID-19 pandemic.

"Research and development, the adoption of digital technology, and affordable and reliable energy will be critical to Australia's future economic prosperity," Treasurer Josh Frydenberg said during his Budget speech.

The federal government detailed in its Budget documents that for small companies, with total annual turnovers of less than AU$20 million, the refundable R&D tax offset will be set at 18.5 percentage points above a company's tax rate, and the AU$4 million cap on annual cash refunds will be canned.

Meanwhile, for larger firms, with annual turnovers of AU$20 million or more, the government said it will reduce the number of intensity tiers from three to two.

"This will provide greater certainty for R&D investment, while still rewarding those companies that commit a greater proportion of their business expenditure to R&D," the government stated.

The changes will commence from 1 July 2021, with Frydenberg touting that the changes would help more than 11,400 companies that invest in research and development.

Read also: Australian tech unicorns say R&D scheme misses the mark

The government also confirmed all other aspects of the 2019-20 mid-year economic and fiscal outlook, including the increase to the R&D expenditure threshold from AU$100 million to AU$150 million per annum.

The announcement follows recent calls by the country's startup ecosystem for government to amend the R&D tax incentive, as they are concerned with the proposed changes to the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019.

In February last year, the Senate Economics Legislation Committee asked for the R&D Bill to be taken back to the drawing board, saying at the time it recognised the need for government to maintain public confidence in the integrity and financial sustainability of the R&D tax incentive, but that it was not confident the introduced measures would provide exactly that.

For other parts of the research community, the federal government has handed the Commonwealth Scientific and Industrial Research Organisation (CSIRO) an extra AU$459 million over four years as part of 2020-21 Budget. The government said this cash injection would help CSIRO "address the impacts of COVID-19 on its commercial activities and ensure it is able to continue essential scientific research". 

The additional funding for CSIRO is timely, given its ON program wrapped up in the middle of this year, after funding for it dried up. The Australian government had previously handed it AU$20 million over four years under its AU$1.1 billion National Innovation and Science Agenda to help commercialise the country's research. 

See: Team Australia: CSIRO's multimillion-dollar post-coronavirus plan

In this latest Budget, AU$1 billion has also been allocated to support universities' costs of research.

Specifically, this will include AU$41.6 million over four years to together universities and local industries to partner on innovative reform projects; AU$20 million over four years to establish a Centre for Augmented Reasoning at the University of Adelaide to improve the application of machine learning in Australia; and AU$5.8 million for the Department of Education, Skills and Employment to undertake a scoping study of potential options to accelerate the translation and commercialisation of research, including through new partnerships between universities and industry and opportunities for investments.

Despite this funding for universities, students will still be left shortchanged after the South Australian minor party Centre Alliance decided to back the federal government's controversial changes to university course funding. Under the proposed changes, the federal government will lift fees in degrees such as law and humanities, while decreasing the cost for qualification in fields such as maths and science.

"I don't think Australians want an American-style university system where people graduate with debts that take them a lifetime to repay, if they ever repay them," Shadow Minister for Education Tanya Plibersek said.

"At the heart of this Bill is a billion-dollar cut from government funding to universities. At the heart of this Bill is a plan that more than doubles the cost of a university degree of thousands and thousands of Australians."

Nonetheless, the federal government has announced it will provide AU$8.9 million over three years to increase the capabilities of the humanities, arts, social sciences, and Indigenous e-research platforms, while also providing AU$8.3 million over three years to establish a new synthetic biology research infrastructure to facilitate rapid responses to emerging disease and biosecurity risks and address critical gaps in technological platforms and informatics.

Supporting women and youths in STEM education

On Tuesday night, the federal government outlined how it will also provide AU$146.3 million over five years to improve the education outcomes for young Australians. Under this package, AU$27.3 million will be used to enhance the science, technology, engineering and mathematics (STEM) skills of young Australians.

Over five years, AU$9.6 million will be given to the Australian Academy of Science to deliver curriculum resources and professional learning for Foundation to Year 10 teachers; AU$5.7 million will be used to expand the Early Learning STEM Australia program to Foundation to Year 2 classrooms; AU$4.8 million will be allocated towards enhancing teaching practices through partnering teachers with STEM professionals; AU$4.4 million will be used to support approximately 120,000 disadvantaged 3 to 5-year olds through The Smith Family's Let's Count program; and AU$2.8 million has been pencilled in to build the skills of early learning educators for delivering STEM learning in preschool and child care settings. 

In addition, under the government's AU$231 million commitment to its second women's economic security package, $25.1 million over five years will be used for a Women in STEM Industry Cadetship program to support 500 women working in STEM industries to complete an Advanced Diploma through a combination of study and work-integrated learning experiences. 

Another AU$14.5 million over four years has also been allocated to extend or expand existing initiatives that support girls and women to gain STEM skills and capabilities, including the Women in STEM Ambassador, the Women in STEM Entrepreneurship Grants Program, and the Girls in STEM Toolkit.

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