In the federal government's budget released 12th May 2009, it was announced that the R&D Tax Credit is to come into effect in the 2010-11 income year.
The R&D Tax Credit is a broad-based, market-driven package to replace the R&D Tax Concession with a tax credit system. It is essentially a simplification of the current R&D Tax Concession so as to provide better incentives for businesses to invest in research and innovation.
The key advantages of the new R&D Tax Credit program are as follows:
- a 45 per cent refundable tax credit (the equivalent to a 150 per cent concession) will be provided to small firms with a turnover of less than $20 million per annum. This means that firms will receive a tax refund of 45 per cent of their R&D spending when they file their tax return;
- a 40 per cent tax credit (the equivalent of a 133 per cent deduction) will be provided to foreign-owned firms, and firms with a turnover of more than $20 million per annum;
- the new refundable tax credit will not be subject to an expenditure cap;
- the complex Premium Concession and International Premium will be abolished;
- the increased benefits to companies are balanced by removal of the complex R&D Tax Concession Premium and tightening definitions to support genuine R&D.
Since the program does not start until 1 July 2010, as an interim measure, the Government will lift the expenditure cap on eligible R&D that can be claimed under the existing R&D Tax Offset from $1M to $2M with effect from 1 July 2009.
A consultation paper on the eligibility criteria in developing legislation for the new Tax Credit will be released in the next few months.
