Public Support for Science and Innovation
Productivity Commission
PO Box 80
BELCONNEN ACT 2616

18/12/2006

To Whom it May Concern:

Re: proposed reduction or removal of current basic 125% tax concession
for investment in R&D
We are aware that one of the recommendations in the Productivity Commission Draft Research Report: Public Support for Science and Innovation (November 2006) is to reduce access to or remove the basic 125% tax concession rate for company expenditure on R&D.
This basic concession is the primary incentive for small businesses in the Northern Territory to engage in R&D, because companies with no R&D track record can access the subsidy right at the start of experimentation and trials. Whereas large firms may have the resources to fully finance their R&D programs and access the 175% concession for additional research, this investment is a substantial, and often impossible, burden for small to medium enterprises (SMEs).
This is of particular concern to the Northern Territory which has very few large
firms, because its business and industry sector is comprised mostly of SMEs, like
Brainware Pty Ltd.
There are two options outlined in the report:
1. maintaining the basic concession for small firms, whose R&D is more
responsive to the subsidy, but using the 175% incremental component as
the principal vehicle for stimulating business R&D, or
2. removing the basic concession entirely and shifting completely to the
175% incremental component if threshold issues about firm size were
considered to provide adverse incentives for the growth of small R&D
enterprises.

Brainware Pty Ltd would support either of these options only if any changes to criteria would maintain current access by the Territory’s SMEs (for example, by defining “small firms” in a way that continues to capture all or most of the Territory’s SMEs) or increase the tax concession rate for SMEs (for example, by replacing the 125% concession with a 150-175% concession while maintaining the criteria by which the 125% concessions are currently granted.) With these safeguards, Brainware Pty Ltd  would support either option.

Yours sincerely,

Peter Bendel, Manager Brainware Pty Ltd