R&D Tax Incentive
In the 2009 budget, the government announced that it intended to introduce a new R&D tax credit to replace the existing 125% R&D tax concession and rebate offset, the 175% premium concession and the 175% international concession. This legislation was recently passed by the Senate with the new program to be known as the R&D Tax Incentive for income years that commence on or after 1 July 2011.
R&D tax incentive for companies with turnover less than $20 million
Where a group’s annual turnover is less than $20 million, companies will be eligible for a 45% refundable credit, with no limit on the amount expenditure claimable under this program. This is a significant increase, as the current refundable offset has a group turnover limit of $5 million, and Aggregate R&D Expenditure capped at $1 million.
For the R&D tax incentive the turnover limit has been increased to $20 million, and the cap abolished.
The government estimates that 5,500 firms will benefit under these new arrangements.
R&D tax incentive for companies with turnover greater than $20 million
Where group turnover is over $20 million, companies will be eligible for a 40% non-refundable credit, equivalent to a 133% tax concession, again one-third higher than the current basic rate of support.
Further, companies conducting R&D in Australia where intellectual property rights are held offshore (as for the current international premium R&D concession) will also able to access this credit.
Transitional provisions
From 1 July 2009, companies that currently claim the R&D tax rebate offset will be able to spend more on a group Aggregate R&D Expenditure basis and remain eligible for the program. This limit was increased from $1 million in expenditure to $2 million with the $5 million group turnover limit remaining.
What are the next steps?
The existing R&D Tax Concession continues to apply for income years commencing prior to 1 July 2011.
About Michael Johnson Associates
Founded in 1983, Michael Johnson Associates (MJA) is Australia's leading specialist R&D tax concession firm. We work with organisations of all sizes to help them understand the benefits of a compliance approach to R&D tax concessions and grants.
We know the complex legislation, amendments and guidelines related to government programs inside out - we deal with them every day. We also write the commentary on the R&D tax incentive for the CCH Federal Tax Reporter.
Please contact us on (02) 9810 7211 or via e-mail to see how we can be of help to you.
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