Board of Taxation Review – R&D Tax Incentive Administration
As a leading professional services firm, KPMG Australia not only seeks to help our clients, but also employees, governments, regulators and the wider community. We strive to contribute to debate shaping the Australian economy and welcome the opportunity to provide considered input on a range of issues
One of those issues which we believe will help Australian innovate and grow over the longer term is a strong and sustainable Research and Development Tax Incentive (R&DTI). Accordingly, we welcome the Board of Taxation’s review of the dual-agency administration model for the Research and Development Tax Incentive (R&DTI) (the Review).
The Review seeks to identify opportunities to reduce duplication, simplify administrative processes and reduce compliance costs between the administrators: the Australian Taxation Office (ATO), Industry Innovation and Science Australia (IISA) and the Department of Industry, Science, Energy and Resources (DISER). AusIndustry sits within DISER and delivers the program on behalf of IISA and, together with the ATO, are the two agencies that administer the R&DTI.
The Board of Taxation’s (the Board) focus on evaluating the R&DTI dual-agency administration model is particularly important given the valuable role industry led R&D (and the R&DTIs that support them) play in a country’s longer term productivity. Growth in productivity is key, particularly in the economic recovery from the COVID-19 pandemic, since it generates more sustainable growth, stronger global competitiveness and better living standards.
Industry investment is a strong enabler of productivity growth with research showing R&D investment increases the technological potential of an economy1. A stable R&DTI is one of the most effective means for the government to achieve increased business productivity and economic growth, and an effective administration model is critical to the success of the R&DTI. It is also important to remember that there is a risk of change fatigue amongst claimants, so any significant changes to the program must be well founded and produce real benefit.
Whether there is a single or dual agency model going forward, the legal framework, administrative practices, use of experts and interpretation of the legislation all need to align and we believe there are opportunities to streamline the process and address some challenges that exist in the current model.
KPMG’s submission seeks to directly respond to the consultation questions and sets out 27 recommendations at section one. KPMG’s recommendations include providing clarification on the roles and responsibilities of the administrators, the publication of AusIndustry metrics or key performance indicators, the development of a R&DTI Customer Charter, archiving superseded guidance to ensure previous guidance is publicly available and the allocation of a single case manager or liaison person who can help coordinate administrator reviews and other interactions.
It is important that any clarification on the roles and responsibilities of the administrators starts with a review of the legislative framework to ensure the administrative model is well founded.
From there, clear and unambiguous guidance around the roles, responsibilities and accountability of the administrators will be essential for taxpayers looking to claim their R&D activities.
In addition, a number of options have been proposed to lower compliance costs for taxpayers, including the potential application of standard methodologies which would be subject to ‘safe harbour’ arrangements and further guidance material in relation to eligible expenditure and how the ATO expects it to be evidenced.
KPMG looks forward to continued engagement with the Review as the Board progresses its final report and recommendations.
1. Bayarcelik, Ebru & Taşel, Fulya. (2012), Research and Development: Source of Economic Growth. Procedia – Social and Behavioural Sciences. 58. 744–753.
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