News and Research

The R&D Tax Incentive will remain intact after the Business Tax Working Group failed to find a solution to produce a revenue-neutral way to cut Australia’s corporate tax rate.

The Government funded working group was established last year and asked to provide the government with recommendations on how to improve the business tax system.

A draft report released by the Working Group in August made several suggestions as to how the corporate tax rate could be cut, including a controversial reduction to the R&D Tax Incentive introduced in July this year. However, while the working Group agreed that a reduction of 2-3 per cent in the corporate tax rate would benefit the economy, they could not produce a solution to fund the cut while remaining revenue-neutral, therefore sparing the R&D Tax Incentive.

82 entities made submissions to the working group, many of which rejected one or all of the options suggested. The Australian Chamber of Commerce and Industry rejected all cuts to concessions and recommended that the funding come from a reduction in government spending.

Shadow Treasurer Joe Hockey said the task set by the government was impossible. Mr Hockey said for the tax cuts to be genuine cuts, they are to come from savings within the budget.

However, this seems unlikely to occur in the immediate future as Treasurer Wayne Swan announced that he remains supportive of lower company tax rates in the future, if a consensus can be reached regarding how to fund these cuts from the existing business tax system.