One of the key initiatives introduced in the 2010 Federal Budget
was a proposal to simplify and enhance the Research and Development
Tax Concession from the 2011 income year. The aim of the proposal
is to boost the Australian economy by providing better tax
incentives to reward companies that invest in research and
However, it is clear that as result of the overhaul, a number of
companies will actually be worse off under the proposals. It can be
seen from the budget estimates that Treasury is expecting the cost
of the R&D concessions to reduce by $855 million over the next
three years. The Government has stated that the eligibility
criteria will be tightened to ensure that only genuine R&D is
supported. Furthermore, the premium concession and international
premium will be abolished. Whether the proposed changes will
actually boost "genuine" R&D expenditure will depend
upon the final form that the legislation takes.
Businesses with a turnover of under $20 million will gain the
most with a 45% refundable tax credit which is equivalent to a 150%
tax concession. This will allow companies to receive a tax refund
of 0.45 cents for every dollar of R&D spending. The major
benefit of the refundable tax credit is that it is available for
companies in a tax loss position.
The table below provides a comparison between the current 30%
R&D tax offset and the proposed 45% refundable tax credit.
Current 30% R&D Tax Offset
Proposed 45% Refundable Tax Credit
Available for companies with a turnover of less
Available for companies who spend less
There is no limit on the R&D spending
Note: As a transitional measure for the 2010 income year, the
R&D tax offset will be available for companies that spend up to
$2 million (as opposed to the existing $1 million limit) on R&D
Larger Businesses And Foreign Businesses
Businesses with a turnover of more than $20 million will be
eligible for a 40% non-refundable tax credit which is equivalent to
a 133% tax concession.
Furthermore, in an attempt to encourage multinationals to bring
their R&D into Australia, companies that hold intellectual
property offshore will also be eligible for the 40% non-refundable
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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