Labor promises to reform R&D tax incentive and probe Aussie research sector

The Australia Labor Party has announced its intentions to reform the Research and Development (R&D) tax incentive if successful in the federal election later this month.

In a joint statement from four shadow ministers, Labor said it would change the program objectives of the R&D tax incentive scheme to have the overarching target of improving Australian business "collaboration" with research institutions, citing the nation's increasingly poor performance among OECD peers as its main reason.

Labor's plan would reward those that work with researchers in universities and public research agencies with a 10% premium, it said. The premium could be claimed by firms that engage in activities such as: Cooperating with a university or CSIRO to develop a new product; placing industry researchers within a university facility; employing recent PhD graduates in their first three years of employment; or hiring PhD students to do industrial research with a company.

"Labor wants the R&D tax incentive to be a tool that fosters an alliance between blue collar and white coat to build an advanced industrial system for the 21st Century," the statement read. "Lifting industry engagement with the research sector is vital to achieving these aims."

Additionally, Labor wants to encourage global companies to conduct R&D in Australia.

See also: Tax cuts might force Cochlear to send R&D overseas

The R&D tax incentive, touted by Labor as the single largest investment made by the Commonwealth to support science, research, and innovation, was stranded, following a report into the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 in February highlighting a need for revision.

In its report, the Senate Economics Legislation Committee asked the federal government to go back to the drawing board on a range of measures within the Bill, saying while it recognises the need for government to maintain public confidence in the integrity and financial sustainability of the R&D tax incentive, it was not confident the introduced measures would provide exactly that.

"This confidence promotes business innovation across the economy and allows the scheme to meet its stated objectives of additionality and spillovers," the committee wrote. "Further, the committee recognises that, while the R&D tax incentive in its current form is falling short of these aims and objectives, there is a need to reform the R&D tax incentive.

"On the weight of evidence presented, the committee considers that the bill should not proceed until there is further consideration of the R&D tax incentive measures."

According to Labor, the startup and software sectors have lost confidence in the program in its current and proposed future form.

The R&D tax incentive was introduced in 2011 in its current form. It is the principle mechanism used by the Australian government to stimulate industry investment in R&D, and does this by providing a tax offset for eligible R&D activities.

Approximately 13,000 companies are registered in the R&D tax incentive scheme.

See also: Data61 says Australia is still missing out on innovation opportunity

Also on Opposition Leader Bill Shorten's hit list is a "root and branch review" of Australia's research sector -- the first, Labor said, in 30 years.

It will be conducted by former Chief Scientist Professor Ian Chubb, with the review expected to guide the government in setting priorities, including a "strategy for collaboration".

Alongside the review, Labor said it would also establish tripartite innovation councils in specific industries such as food and fibre, electric vehicles, steel, and the built environment. The opposition hopes the councils will bring industry, unions, and researchers together and spark the development of "innovation missions" that stimulate business investment in research and development.

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