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Ford mulls R&D tax changes

Taxing: Australia’s motor industry is trying to determine the impact of budgetary tax incentive changes that will affect research and development projects on vehicles such as the Ford Ranger.

Federal crackdown on R&D incentives has motor industry pondering impact

10 May 2018

AUSTRALIA’S biggest motor vehicle developer, Ford Australia, is still trying to digest the impact of complex changes to research and development tax incentives outlined in the federal budget this week.
While the company concedes the new rules will affect its $450 million-a-year R&D operation at its Ford Asia Pacific Product Development Centre in Victoria, it says its tax team is still analysing the details published in budget papers while also seeking clarification from Canberra on certain points.
The federal government expects the revision to the tax incentive to cut its annual industry R&D incentive spend from $3 billion last year to just $1 billion.
Still smarting from the loss of car manufacturing and thousands of jobs, the Australian motor industry could ill-afford to suffer major cut-backs to its last local bastion – vehicle design and engineering.
The new rules tighten the system to make rorting of the system more difficult, while at the same time “refocusing support for larger companies towards those undertaking additional, higher-intensity R&D”.
Ford fits the description of a larger company – one with an annual turnover of more than $20 million – and appears to be a high-intensity R&D operation, employing about 1500 engineers, designers and technicians on automotive development projects for Ford’s global customers.
For these companies, an R&D premium will now provide multiple rates of non-refundable tax offsets, increasing with the “intensity” of the company’s R&D expenditure.
That intensity appears to be worked out as a percentage of R&D expenditure against overall expenditure.
But Ford Australia brand communications manager Jasmine Mobarek told GoAuto that the company’s tax accountants were still going over the budget papers to get an understanding of the new rules.
“It will have an impact but we are still trying to work out what,” she said. “The tax team is going through it now, but it will take time.”
Thanks to such tax incentives, Ford is now the largest motor company in Australia, with a total workforce of more than 2700, despite the axing of its local car manufacturing operations in 2016.
Sister outfit Ford Asia Pacific operates a design and engineering centre at Broadmeadows, on the site of Ford’s old car assembly plant and national headquarters, on Melbourne’s northern fringe, as well as the You Yangs proving ground at Lara and an additional engineering centre at Geelong.
The Australian operation is the global “home room” for the Ford Ranger ute and related Everest large SUV.
It also does numerous other design and engineering jobs for its parent company. These have including the China-only Escort and Taurus.
Australia’s second biggest automotive developer, Melbourne-based GM Holden, will also be affected by the changes.
It is home to GM Design Australia – one of just a handful of General Motors design centres around the world – as well an engineering centres at Fishermans Bend and a proving ground at Lang Lang.
Like Ford, Holden does design and engineering tasks for GM affiliates, but on a smaller scale since GM axed most of its engineering operation after it completed the Zeta architecture program that spawned the Commodore and American Chevrolet Camaro.
Toyota Australia also has a design studio with 35 designers in its Melbourne product planning department that has an overall staff of 150.
Apart from the major car-makers, smaller companies making components for global consumption will also be affected by the changes.
While the federal government is tightening the R&D incentive rules to cut its outlay, it plans to budget more to enforce them.
It also plans to publish the company names and amount of tax incentives claimed to improve public accountability for R&D claimants.

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