R&D Tax Credits
In the 2009 budget, the government announced that it will be introducing a new R&D tax credit from 1 July 2010. This will replace the existing 125% R&D tax concession and rebate offset, the 175% premium concession and the 175% international concession.
R&D tax credit 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 credit 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 credit 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.
It is unclear whether this program will allow companies to carry forward the benefits of the credit from year to year in the same way as they presently do with enlarged tax losses from the R&D tax concession.
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 will be increased from $1 million in expenditure to $2 million, however the $5 million group turnover limit is expected to remain.
What are the next steps?
The government has announced that they are starting the process of preparing for the new R&D tax credit by exploring how to ensure that “geniune R&D” is supported by this program. As discussion papers, consultation and debate get going we’ll keep you up to date.
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 to see how we can be of help to you.
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