R&D Tax Concession Fact Sheet 

KEY POINTS

• The R&D Tax Concession was introduced in 1985 to encourage Australian industry to undertake more research and development (R&D) activities.
• From the 2010-11 income year it will be replaced with a new R&D Tax Credit in accordance with the Government’s 2009-10 Budget measures.
• The current R&D Tax Concession comprises of:
• a tax deduction of up to 125% for R&D expenditure
• a 175% Premium tax deduction for increases in R&D expenditure above a rolling three year average
• a 175% International Premium for eligible R&D undertaken in Australia, regardless of where the intellectual property is held
• an R&D Tax Offset for companies spending less than $1m for the year and with a turnover of less than $5m.
• as an interim measure prior to the commencement of the R&D Tax Credit, the R&D expenditure cap for the R&D Tax Offset has been lifted from $1 million to $2 million for 2009-10, providing a tangible demonstration of increased Government support for R&D by small companies.
• For the 2007-08 financial year, 7,754 companies were registered for the tax concession; this is a 14% increase on the previous year. These companies reported R&D expenditure of $14.2 billion, an increase of 22% on the previous year. Based on 30 June 2009 data:
• 39% of registered companies used the 125% to claim a tax deduction
• 19% used the 175% Premium to claim a tax deduction
• 35% used the Tax Offset at the 125% and 7% at the 175% rate.

FACTS AND FIGURES

The objective of the R&D Tax Concession is to provide a tax incentive in the form of a deduction, to make eligible companies more internationally competitive by:

• encouraging the development by eligible companies of innovative products, processes and services
• increasing investment by eligible companies in defined R&D activities
• promoting the technological advancement of eligible companies through a focus on innovation or high technical risk in defined R&D activities
• encouraging the use by eligible companies of strategic R&D planning
• creating an environment that is conducive to increased commercialisation of new processes and product technologies developed by eligible companies.

R&D Tax Concession data 1985-86 to 2007-08 (as at 30 June 2009)