The federal budget includes a $2 billion commitment from the government to its research and development (R&D) tax incentive, aimed at helping businesses manage the economic impacts of COVID-19. This improvement is in addition to the $1.5 billion used to promote manufacturing in Australia.
The research and development changes include a reversal of the $1.8 billion saving given to the government under its current R&D tax incentives bill before the Senate and removal of the cap reimbursement of $4 million for businesses with annual turnover of less than $20 million.
For businesses with less than $20 million in annual revenue, the refundable R&D tax deduction is set at 18.5 percentage points above the applicant’s business tax rate, compared to 13.5 percent on the current bill.
Other businesses with higher turnover will still face the current tiered intensity approach, but will now see two tiers instead of three.
The marginal R&D premium will be 8.5 percentage points above the applicant’s corporate tax rate for R&D expenditures with an R&D intensity between 0 percent and 2 percent, while R&D above 2 percent R&D intensity for large companies will see the premium increase to 16.5 percentage points. .
The government has also postponed the start date of the changes to July 1, 2021.
Rebecca Schot-Guppy, chief executive of industry body FinTech Australia, said the budget had been positive for the fintech and innovation sector.
“Perhaps the biggest surprise is the government’s U-turn on its stance on R&D tax incentives,” Ms Schot-Guppy said.
“This policy is important for fintech capital, especially in their early stages, and the changes will undoubtedly support their growth. Additionally, increased R&D spending will ensure new innovative companies enter our economy, helping to lead our recovery.
Sam Pratt, CEO of network provider Render, and Tim Dickinson, CEO of payments company Assembly Payments echoed FinTech Australia’s praise of the R&D changes. Mr Pratt notably called it “huge for Australian technology companies”.
“The $2 billion increase in R&D tax incentives equates to a 20% increase from its 2018-19 level, and its expansion provides a compelling incentive to maintain and grow product teams, technology and engineering in Australia, rather than redirecting these investments into capabilities. elsewhere,” Mr. Pratt said.
But FinTech Australia has expressed concern that tax reforms for R&D will not come into effect until July next year.
“For us to have the best chance of supporting the sector during this pandemic, it needs to be introduced now,” Ms Schot-Guppy said.
She listed other measures as boosts for fintech in the government’s digital business plan, including supporting the rollout of consumer data rights (or open banking in the financial sector), helping to expansion into foreign markets, an examination of the payments and investment landscape. in a digital trade register.
“It’s great to see the government adopting a growth mindset to support businesses and promote greater access to our financial system,” Mr Dickinson said.
He said changes in R&D as well as better access to public digital infrastructure, including the new payments platform and consumer data rights, show the government believes Australia needs to “innovate”. [its] exit” from the crisis.
“However, we must be careful not to undermine the strong foundations we have as a global leader in banking and financial services, particularly at a time when many people are vulnerable,” Mr Dickinson said.
A multinational company also criticized the government’s budget and digital business plan, which had already pledged $795.6 million to move Australia towards a leading digital economy by 2030.
In the budget, the government detailed plans to improve productivity, wage growth and employment by supporting businesses’ adoption of digital technologies.
Gautam Sahgal, global CEO of UK platform Perkbox, noted the budget is “narrowly focused” on the recovery of the Australian economy over the next 12 months, without much room for the future.
“Australia’s digital transformation completion date of 2030 is too far behind the rest of the world and does not provide a competitive advantage,” Mr Sahgal said.
“As a business, we see the incredible value of Australia. This is why we have expanded and continue to plan to invest and grow our Australian office. We would like to see a budget that plays on this same value and continues to position Australia as a global business hub.
But another factor adopted by FinTech Australia is new measures to encourage the employment and training of women in STEM fields.
“Women continue to be underrepresented in fintech,” Ms Schot-Guppy said.
“Until now, it has been up to the market to solve this problem and, as a result, progress has been slow. We hope this diversity move will have substantial social and business outcomes for both the fintech industry and Australia.
