Aussie tech unicorns Canva and Atlassian have taken aim at the proposed changes to the Research & Development Tax Incentive (RDTI) scheme, calling on legislators to consider the current economic climate and pause implementation of any changes until next year.
In late submissions to the Senate Economic Legislation Committee, which is leading the inquiry into the amendment, both tech companies called on the committee to reconsider some of the proposed measures, given the challenging economic environment caused by COVID-19.
The committee is due to issue its report into the changes next week, on August 24, following delays due to the pandemic.
The Atlassian submission, from co-founder and co-chief Scott Farquhar and head of policy and government affairs Patrick Zhang, noted the importance of government support for R&D, “in particular, to fledgling companies looking to make a mark”.
“As such, we consider it an important part of our role in the Australian technology landscape to highlight concerns that impact the sector at large and the startup community in particular.”
R&D is at the core of Australian innovation, the submission said. And the RDTI is the “most significant program” available to Aussie businesses engaging in R&D.
Even before the COVID-19 pandemic, many tech companies relied on RDTI to support them during their early stages, the submission said. Now, the incentive is more important than ever to the tech sector, but also to Australia’s economic recovery more broadly.
“We cannot support the Bill as it is currently drafted,” the submission said.
“It would reduce support for R&D at a critical juncture when Government should be seeking to stimulate such spending and supporting nascent companies,” it went on.
“Perhaps most glaringly, the Bill before the Committee was introduced long before the COVID-19 pandemic swept the globe and therefore fails to contemplate the current economic context.”
While using slightly less strong language, Canva’s submission — from chief financial officer Damien Singh — also made some “observations” about the proposed changes.
Both tech giants expressed concern that a $4 million cap would effectively reduce the tax offset rate for smaller companies — those with annual revenues of $20 million or less.
Canva’s submission also suggested that the $20 million threshold could be increased to $50 million, bringing it in line with what constitutes a small business under other parts of tax legislation.
Atlassian’s submission pointed to the ongoing question around whether software development is eligible under the RDTI program, while Canva called transparency requirements into question.
Canva also criticised the controversial decision to implement any changes retrospectively.
Earlier this month, the Australian Taxation Office confirmed that businesses accessing offsets before the legislation is finalised may have to make repayments later, as they revise their claims.
Both Canva and Atlassian called for three immediate measures to be undertaken, taking the COVID-19 crisis into account.
First, they suggested delaying the application of any changes until July 1, 2021, or later, and implementing a pause on clawbacks in the meantime.
They also suggested paying RDTI offsets quarterly. And, rather than curtailing support at a time of economic hardship, they suggested providing a one-time stimulus to eligible small businesses using the RDTI.
R&D is “fundamental to furthering Australia innovation”, Canva said, particularly as the economy emerges from the COVID-19 crisis.
Innovation will drive Australia’s future prosperity, it said.
“We note with encouragement recent COVID-responsive stimulus efforts by the Government across several important sectors. An improvement to the RDTI would be a timely step for a stimulus targeted at the innovation and technology sectors of the economy.”