Australian Industry Group Raises Concerns Over ATO’s New R&D Tax Incentive Reporting Amid Declining Investment
In a period marked by declining business research and development (R&D) investment in Australia, the Australian Industry Group (Ai Group) has expressed significant concerns regarding the Australian Taxation Office’s (ATO) new reporting requirements for the R&D Tax Incentive, a move they believe may exacerbate the country’s R&D challenges.
Recent data shows that business R&D investment fell to 0.89% of GDP in 2021-22, representing the lowest level in 20 years. This decline has caused Australia to drop from 12th to 19th place in the OECD R&D rankings, trailing behind all G7 major economies. Industry leaders fear that the ATO’s decision to disclose the details of 11,545 companies participating in the R&D Tax Incentive—already considered a complex and uncertain process—will make the program even less appealing for businesses.
Innes Willox, Chief Executive of Ai Group, criticized the current state of the program, noting: “It is telling that this data reveals that of the $20.6 billion of business R&D conducted in 2021-22, only 54% was subsequently claimed to the ATO under the R&D Tax Incentive. This low utilization rate points to design inefficiencies that are preventing our R&D-active businesses from properly accessing the R&D Tax Incentive.”
While emphasizing support for transparency in government funding, Willox questioned whether the new reporting requirements would genuinely improve compliance. He argued that if the ATO already has knowledge of entities engaging in non-compliant activities, the agency should directly address these issues rather than publicly sharing the details of compliant participants.
Willox also highlighted a potential unintended consequence of the new regulations: “Ironically, the new reporting requirements may inadvertently benefit the bad actors the ATO aims to eliminate. By providing a detailed ‘shopping list,’ the ATO has potentially armed these entities with the information needed to navigate and exploit the system further.”
The Ai Group has pledged to work closely with its members and actively engage in the Strategic Examination of Australia’s R&D System. Willox concluded: “We will continue to advocate for a more effective and less burdensome compliance framework, ensuring that R&D investment in Australia regains its momentum.”
The Ai Group’s stance underscores the importance of encouraging R&D investment as a driver of innovation and economic growth, and the need to create policies that foster, rather than hinder, business participation in R&D activities.
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