Australian companies are being encouraged to become more
innovative and globally competitive via a new R&D Tax Credit
incentive being introduced by the Federal Government. The Bills to
establish the R&D Tax Credit are currently before Parliament
and the scheme is expected to commence on 1 July 2011.
The new R&D Tax Credit will replace the existing R&D Tax
Concession scheme. It will provide a targeted tax offset designed
to encourage more companies to engage in research and development
The entities that will be eligible for the new R&D Tax
corporations that are Australian residents for tax
foreign corporations that carry on R&D activities though a
permanent establishment in Australia; and
corporations acting as trustee of a public trading trust.
This represents an expansion on the kinds of entities presently
eligible for the R&D Tax Concession. By expanding access for
foreign corporations the Government hopes to strengthen
Australia's negotiating position in future tax treaties and
provide an inducement for more companies to conduct their R&D
activities in Australia.
The R&D Tax Credit will apply to activities and expenditure
in income years commencing on or after 1 July 2011, while the
existing R&D Tax Concession will apply to activities and
expenditure in income years prior to 1 July 2011.
The new scheme will deliver a 45 per cent refundable tax credit
to companies with an aggregated turnover of less than $20 million
and a 40 per cent non-refundable offset to all others.
Under the scheme, tax offsets are applied directly to a
company's income tax liability to reduce the amount of tax they
have to pay. The 45 per cent R&D Tax Credit will be a
refundable tax offset, which means that once a company's tax
liability is reduced to zero, companies may access a cash refund
for any unused offset amount. The 40 per cent R&D Tax Credit
will be a non-refundable tax offset, which means that companies
cannot access a cash refund for any unused offset amount once their
liability has been reduced to zero. However, these excess offsets
may be carried forward into future income years.
The Government will provide quarterly payments for small and
medium businesses from 1 January 2014. As a result these firms
will get their credit sooner, thereby improving their cash flow and
incentive to invest in R&D.
An advisory group will be established through the Innovation
Australia Board to monitor the implementation and operation of the
Credit scheme. The Government, through AusIndustry,
will run an extensive education program to ensure firms are kept up
To keep up to date with developments in the R&D Tax Credit
program those interested can subscribe
to AusIndustry's free email updates.
Subscribers will receive an email notification when any new
information is added or existing information is changed.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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