The R&D Tax Credit was announced in the May 2009 Budget as part of the Government’s Innovation Agenda, Powering Ideas – An Innovative Agenda for the 21st Century. It was originally intended to commence on 1 July 2010, but has been delayed for a year due to what the Labor Government has characterised as a ‘parliamentary road-block put in place by the [Liberal/National conservative] Coalition’.
As of July, the new Senators elected in last year’s elections take their seats, resulting in a major change in the make-up of the upper house, with nine Greens senators gaining the balance of power.
Although the final legislation will not be passed until after 1 July 2011, when the new Senate sits, companies undertaking eligible R&D activities from this date will be entitled to access the R&D Tax Credit.
The R&D Tax Credit replaces the former ‘R&D Tax Concession’. Eligible companies will be able to claim a tax offset for expenditure on eligible R&D activities. The program comprises two components:
- a 45% refundable tax offset available to companies with an aggregated turnover of less than $20 million; and
- a 40% non-refundable tax offset available for all other companies.
COMPARISON OF TAX CREDIT WITH THE EXISTING CONCESSIONThe R&D Tax Credit is intended to be simpler, fairer and more accessible than the R&D Tax Concession, by providing:
- more generous benefits, in particular for small-to-medium enterprises (SMEs);
- a clearer definition of research and development activities;
- expanded access to foreign companies who undertake R&D in Australia and to companies that hold their intellectual property offshore; and
- greater certainty in R&D investment, with companies able to seek an advance finding from Innovation Australia where they are uncertain of the eligibility of the activity.
HOW IT WILL WORKThe R&D Tax Credit is similar to the old tax concession scheme, in that it will be available to all industry sectors, and will operate on a self assessment basis, whereby companies can make their own determination of whether activities conducted are eligible R&D activities.
The new program will be jointly delivered by Innovation Australia (with the assistance by AusIndustry) and the Australian Tax Office.
Companies will be required to register their activities annually within 10 months after the end of the income year in which the activity was conducted.
FOR MORE INFORMATION…The relevant legislation is:
- the Tax Laws Amendment (Research and Development) Bill 2010; and
- the Income Tax Rates Amendment (Research and Development) Bill 2010.
For activities undertaken prior to 1 July 2011, details on how to register for the existing R&D Tax Concession are available from the AusIndustry website.
As further information regarding the new R&D Tax Credit becomes available, it will be posted on the AusIndustry and/or the Department of Innovation, Industry, Science and Research websites.