The Greens will demand $350 million a year in tax credits be stripped from oil and gas exporters such as Chevron, Woodside and Shell before they will consider backing Labor’s proposed overhaul of research and development tax incentives.
Treasurer Jim Chalmers is expected to introduce legislation to overhaul the R&D tax scheme when parliament returns this week.
With the Coalition sceptical of the changes, which it considers yet another example of start-ups being targeted by Labor, along with the controversial changes to the capital gains tax discount, Chalmers is likely to need Greens support in the Senate.
But the Greens’ treasury spokesman Nick McKim said Labor could not rely on their votes unless changes were made to stop fossil fuel companies being able to benefit from the scheme, which aims to incentivise firms with cash refunds and tax credits of up to 48 per cent of eligible R&D expenditure.
In the most recent Australian Taxation Office transparency data from 2023-24, Chevron claimed $98 million in R&D tax credits and Shell claimed almost $86 million, making them the eighth- and ninth-biggest claimants that year. Woodside claimed $75 million, Inpex $42 million, and Exxon $39 million.
“Research and development tax incentives should be supporting the industries of the future, not subsiding dinosaur industries of the past,” McKim told The Australian Financial Review on Sunday.
There is precedent for imposing industry bans. Chalmers last year carved out gambling companies from accessing the scheme after the Financial Review revealed poker machine empires Aristocrat and Ainsworth Game Technology has claimed $22.1 million and $15 million respectively.
“Our reforms to the R&DTI are all about incentivising more research, driving innovation and boosting productivity,” Chalmers said in a statement issued on Sunday in response to questions.
“They’re part of a broad package of reforms that support small businesses and start-ups, through more than $3.8 billion in concessions and tax cuts.”
In the May budget, Chalmers and Industry Minister Tim Ayres announced R&D cash refunds would be limited to companies under 10 years old – later lifted to 15 years after a backlash from biotech start-ups. The government also plans to remove tax break eligibility from supporting R&D activities, such as prototype development.
There is widespread confusion in the innovation and start-up space about how the changes will affect critical research in biotech, climate tech, and deep tech like quantum computing.
In particular, there are concerns about how the 10-year refund cap will be applied. Under the current legislation, it appears that the cap will apply to the oldest company in a group, meaning that a start-up that is bought out or spun out by an existing group would not be eligible for cash refunds.
The sector is hopeful the legislation slated for introduction this week will address some of these concerns, but it is also gearing up for a public fight if it falls short, according to multiple sources familiar with the plans.
The changes were roundly criticised by the research and innovation sector, including by almost 20 leading research groups like the Australian Academy of Science, the Group of Eight universities, and the hand-picked panel, led by Tesla chairwoman Robyn Denholm, that former industry minister Ed Husic recruited to conduct a review into Australia’s innovation system.
In a letter to Ayres copying in Chalmers and Health Minister Mark Butler after the changes were unveiled, Denholm and her fellow reviewers – burns specialist Professor Fiona Wood, former chief scientist Ian Chubb and new Tech Council of Australia chief executive Kate Cornick – said that despite what Chalmers’ and Ayres’ claimed, the panel never recommended “detrimental” changes included in the budget.
Even some Labor MPs are angry about what is being proposed. Victorian senator Michelle Ananda-Rajah earlier this month broke ranks with the treasurer to take aim at both changes.
“There is a false dichotomy between core and supporting R&D. They are two sides of the same coin. They are complementary and reinforcing,” she said.
The Financial Review also revealed this month that fund managers have started shelving plans for Australian biotech investments over fears the changes will strip tens of millions of dollars in cash flow from promising start-ups.
Extracted in full from: https://www.afr.com/politics/federal/chalmers-faces-350m-showdown-over-fossil-fuel-r-and-d-tax-credits-20261025-p618eo
