Treasury to tweak R&D rebate laws after WA backlash

Treasurer Josh Frydenberg has agreed to re-jig controversial laws restricting access to cash rebates for research and development spending after a Senate committee looking at the new rules recommended they needed “finessing”.

The measure would have capped the research and development cash refund at $4 million from this financial year.

It was part of a suite of corporate tax changes the Federal Government launched in last year’s Budget, hoping to raise $2.4 billion.

The cap was opposed by a suite of WA mining companies, particularly those in the emerging battery minerals sector, and the State Government, arguing it would damage the chances of WA developing a downstream processing industry.

Yesterday a Senate committee examining the laws recommended the Treasurer push back the introduction of the measures, arguing a longer lead-in period is needed given some companies have made investment decisions based on receipt of the cash rebate.

“On examination of the proposed $4 million cap on the refundable tax offset, the committee believes that it would benefit from some finessing to ensure that research and development entities that have already made investment commitments are not impeded unintentionally,” committee chairwoman Jane Hume said.

Mr Frydenberg told WestBusiness he still supported the thrust of the measures, partly designed to crack down on systematic rorts that have blighted the program since it was introduced in 2011, but said he agreed with the committee’s recommendation that changes were needed.

“The Senate Economics Committee report concluded that R&DTI reform is needed. We agree with the committee’s recommendation that Treasury consider technical refinement to implementation,” he said.

Rare earths miner Northern Minerals argued the changes would cost it $12 million this year, forcing it to raise more cash from Chinese investors and diluting Australian ownership of its Browns Range rare earth project, where the company says it has already spent $190 million.

The tax office has long wanted to restrict access to the cash rebate, arguing a measure intended to cost the Budget about $1.4 billion a year when it was introduced in 2011 had blown out to $6.8 billion by 2015-16.

The ATO told the committee it had completely knocked back almost a third of the 151 “high risk” submissions it reviewed last financial year.