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Very puzzling': Tech leaders question government's $1.8b tax move

Atlassian co-founder and co-CEO Scott Farquhar has called on the Morrison Government to increase support for research and development companies. Images: Getty
Atlassian co-founder and co-CEO Scott Farquhar has called on the Morrison Government to increase support for research and development companies. Images: Getty

Increasing Australia’s investment in innovation will deliver a “10-fold” reward in the future, business leaders have said while calling out a government plan to cut funds.

Proposed changes to the Australian Research and Development (R&D) Tax Incentive scheme could see future spending cut by $1.8 billion and cap tax offsets for small companies. The changes would also see some companies forced to pay back some of their tax claims made under the offsets.

However, in a letter sent to Prime Minister Scott Morrison on Friday, a group of high-profile tech and startup executives and leaders have warned that this is the time for the government to be increasing support for research and development.

The letter was signed by leaders at Atlassian, Canva, Airwallex, Culture Amp, StartupAUS, Prospa, Freelancer, NextDC and more.

“Cutting R&D makes no sense, especially while the government is looking for ways to rebuild our economy. The technology industry is a fast-track to Australia’s post-pandemic recovery. It’s a massive force multiplier for jobs and already makes up 6 per cent of our GDP, a number which could be much higher,” Atlassian co-founder and co-CEO Scott Farquhar said.

“Doubling down on our investment in innovation now will reward our nation 10-fold into the future.”

Culture Amp CEO Didier Elzinga echoed Farquhar’s concerns, describing the potential divestment as a “very puzzling move”.

“There is no doubt that the R&D Tax Incentive has enabled countless companies, Culture Amp included, to invest in creating world-leading technology, which in turn creates thousands of jobs. It is also a critical tool in having great companies choose to continue to stay in Australia rather than heading overseas."

The letter authors said Australian investment in research and development already lags behind peer OECD nations and raised concerns over the impact of the proposed changes for smaller companies, noting the difficult landscape for small businesses.

Instead, the Government should consider providing a one-time stimulus to eligible small companies through the R&D Tax Incentive, the authors said.

Additionally, it should introduce a temporary moratorium on R&D Tax Incentive clawbacks, pay companies early refunds and increase the level of support available within the program.

The authors also called for software development companies to be able to access the R&D Tax Incentive scheme.

“While we appreciate that these investments will come at an expense, we propose them with the firm belief that the innovation economy, including the tech economy (reported to account for over 6 per cent of national GDP already), will drive the future of Australia’s prosperity,” the authors said.

“We note with encouragement recent coronavirus-responsive stimulus efforts by the Government across several important sectors. An improvement to the RDTI would be a timely first step for a stimulus targeted at the innovation and technology sectors of the economy, and is fundamental to the maintenance and growth of Australia’s new technology-based economy.

“It is the first critical step to building our post-COVID-19 future.”

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