The Tax Council has recommended as usual for the administration of the research and development tax incentive and rejected the concept of a separate regime just for software applications.
Deputy Treasurer Michael Sukkar released the Council’s review of the Research and Development Tax Incentive (RDTI) on Tuesday, four months after the government received it.
The Board of Taxation has recommended that the dual administration of the RDTI between the Australian Taxation Office (ATO) and the Department of Industry be maintained, but that a number of improvements be made.
Despite a number of submissions to the survey raising concerns about how software claims are handled under the scheme and calling for a separate scheme, the Council did not recommend this to the government.
The report was commissioned by the government as part of last year’s budget and comes after the first financial year since the implementation of significant RDTI reforms.
The RDTI is jointly administered by the ATO, the Department of Industry and Industry Innovation and Science Australia, with the Board of Taxation examining potential duplication with this dual administration and options for streamlining it.
The 84-page report examines this “relatively unique” form of dual administration and recommends continuing with it, as any change would be difficult and ineffective.
“There would be significant complexities and costs involved in dismantling the existing dual agency model and moving to a single agency model,” the report said.
“There was a strong conception and preference from a number of stakeholders to see a period of relative stability with the program to avoid increased uncertainty, confusion and increased administrative burdens associated with modifying existing processes.
In 17 submissions, the Board was told that there had been a “blurring of the lines” between the roles of RDTI administrators, and that the long delays in completing audits had created confusion and frustration.
The Council recommended a number of improvements, including better defining the roles and responsibilities of trustees, legislative changes to allow better information sharing between agencies, clear and relevant guidelines regarding complaints and deadlines for review and enhanced alternative dispute resolution processes.
“They will continue to improve the RDTI program to ensure it is administered effectively and efficiently, as well as to ensure a more streamlined and cost-effective process for businesses,” the report said.
Despite a number of submissions to the inquiry calling for a separate software claims regime, including from the Tech Council of Australia, the Council ultimately chose not to recommend this, saying comparable jurisdictions have not. done despite similar challenges.
“The Board of Directors recognizes the challenges faced by these companies and agrees that with the rapid advances in software development, it is important that improvements are made to the RDTI administration model to ensure that there is a path to participation for companies in the software industry,” the report states.
“It is also important that the program achieves the government’s policy objective of stimulating the economy by encouraging companies to develop innovative ideas and activities.
“The Board is of the view that the RDTI program in its current industry-neutral format is appropriate to support all industries and, therefore, the Board does not support a separate RDTI program for the software industry.”
Current legal secrecy provisions that prevent the ATO and the Department of Industry from sharing information relating to the RDTI program create “significant inefficiencies in administration”, with companies bearing the brunt.
The Board of Taxes has recommended that the government make legislative changes to enable wider sharing of RDTI information between departments.
He also called for a “matching” between the timing of business activities, the deadline for registering the tax benefit with the Ministry of Industry and filing a tax return with the ATO , and further training for evaluators.
The national audit office also completed a report on the administration of the RDTI late last year, concluding that it was “largely effective”.
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