Cochlear hits back at Canberra tax moves

The hearing implants maker is likely to move R&D activity offshore as Australian tax incentives are cut.

Cochlear chairman Rick Holliday-Smith said the concession changes are likely to see it progressively scale back local operations. Picture: News Corp Australia.

Cochlear has hit out at Canberra’s savings measures, warning it may move its R&D activities offshore as local tax incentives are trimmed.

Chairman Rick Holliday-Smith said the hearing implants maker had benefitted greatly from the Commonwealth’s R&D tax concession, but with an annual tax benefit of $10 million now at risk, other options were emerging.

“We note that Australia is now reducing these R&D incentives at a time when many other countries appear to be increasing incentives to attract R&D investment,” he said at the group’s annual general meeting today.

“Recent changes announced as part of the omnibus bill, as well as further proposed changes, will materially reduce the R&D tax benefits to Cochlear in Australia.”

Mr Holliday-Smith said the concession had been a “contributing factor” in Cochlear’s decision to conduct the majority of its research in Australia, with the changes likely to see it progressively scale back local operations.

“There may be little or no apparent impact from changes to taxation policy in the first year, but over time we may see the loss of an increasing amount of research investments to overseas jurisdictions,” he said.

“Cochlear will continue to vigorously promote the maintenance of a globally competitive R&D tax concession regime in Australia.”

In what could be perceived as a pivot to its overseas operations, where the bulk of its revenue is derived, Cochlear also announced chief executive Chris Smith would relocate to the US.

However, the group stressed a commitment to maintaining its Australian base, with Mr Smith’s case seen “unique”.

Mr Smith moved to Sydney upon accepting the top job last year, shifting from the US where he served as the boss of Cochlear’s North American operations.

“While it was intended that he be based in Australia, Mr Smith will continue to reside in the US for family reasons,” Mr Holliday-Smith said.

“Given the global reach of Cochlear, the CEO role travels extensively, with Chris Smith spending as much time in the US as he does in Australia. As such, the board does not believe this change will be disruptive.”

Cochlear also reaffirmed guidance for net profit growth between $210 and $225 million in fiscal 2017, which represents a 10-20 per cent lift on last year.

At 11.15am (AEDT), Cochlear shares traded up 0.1 per cent at $136.86, as against a broader market rise of 0.2 per cent.