R&D Tax Credit Fact Sheet 

KEY POINTS

• The 2009-10 Budget announced the replacement of the R&D Tax Concession with an R&D Tax Credit following the recommendations of the Review of the National Innovation System on tax support arrangements for R&D.
• The new R&D tax incentive will have two components:
• A 45 per cent refundable tax credit (equivalent to a 150 per cent concession) will be available to firms with an aggregated turnover of less than $20 million per annum.
• A 40 per cent non-refundable tax credit (equivalent to a 133 per cent concession) will be available to firms with an aggregated turnover of $20 million or more per annum.
• The new R&D Tax credit is a broad-based and market-driven package. It will increase the base rate of government assistance for R&D conducted by business.
• The complex R&D Tax Concession Premium and International Premium will be removed and definitions of eligible R&D reviewed to provide better targeted support.
• The new measure is simple, predictable and adopts the international practice of using a well-understood tax credit to support business R&D.
• 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.
• Since the announcement of the R&D Tax Credit, three rounds of public consultations were held, with 383 written submissions received from a variety of stakeholders.
• Changes were made to the legislation in response to stakeholder feedback. The changes are reflected in the Tax Laws Amendment (Research and Development) Bill 2010 introduced to Parliament on 13 May 2010. The Bill was passed by the House of Representatives on 17 June 2010.
• However, Parliament adjourned before the Bill 2010 could be brought to a vote in the Senate and was subsequently prorogued due to the Federal election.
• The new R&D Tax Credit is designed to be revenue neutral over the first four years of its operation.

FACTS AND FIGURES

• The R&D Tax Concession is currently accessed by around 8,400 firms of all sizes from all sectors.  These firms are expected to access the new R&D Tax Credit and this will mean that the R&D Tax Credit will have the greatest reach of any Australian business innovation program.
• Small firms stand to benefit from the refundable 45 per cent tax credit.
• Larger firms will benefit from the certainty of non-refundable 40 per cent tax credit.