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.
• 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; and
• creating an environment that is conducive to increased commercialisation of new processes and product technologies developed by eligible companies.
• The 2009-10 Budget announced the replacement of the R&D Tax Concession with an R&D Tax Credit. Parliament adjourned due to the federal election before the Tax Laws Amendment (Research and Development) Bill 2010 could be brought to a vote in the Senate.
• 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.
• The R&D expenditure cap for the R&D Tax Offset has been lifted from $1 million to $2 million from the 2009-10 income year.

FACTS AND FIGURES

• For the 2008-09 financial year, provisionally 8,439 companies were registered for the tax concession; this is a 8.7 per cent increase on the previous year. These companies reported provisional R&D expenditure of $17.4 billion, an increase of 22 per cent on the previous year.
• 39 per cent of registered companies used the 125 per cent to claim a tax deduction.
• 19 per cent used the 175 per cent Premium to claim a tax deduction.
• 34 per cent used the Tax Offset at the 125 per cent
• 7 per cent at the 175 per cent rate.
• The cost to revenue of the R&D Tax Concession has grown from $370 million in 2001 02 to an estimated $1,606m in 2009 10, an average growth rate of 20 per cent per annum

R&D Tax Concession data 1985-86 to 2008-09 (as at 30 June 2010)