Research and Development Tax Concession New Elements 2007 Evaluation

The 2007 evaluation of the new elements of the R&D Tax Concession focused on the features of the R&D Tax Concession that were introduced in 2001:

  • 175% Premium: for research and development (R&D) expenditure above the average of a company's previous three year R&D expenditure.
  • R&D Tax Offset: available for small companies in tax loss, which provides the option of receiving an early cash payment based on eligible R&D expenditure rather than a future entitlement to a deduction.
  • R&D plans: required to be prepared by a company, for all R&D activities registered under the R&D Tax Concession.

Evaluation findings:

  • The 175% Premium was associated with an average increase in R&D of $379 million per year.
  • The 175% Premium was effective in retaining and attracting R&D in Australia.
  • The Offset had introduced an average of 1,000 extra companies per year, and was associated with an additional $310 million R&D per year. This was approximately a doubling of R&D expenditure below $1 million.
  • The Offset had a favourable impact and was effective.
  • The R&D plans were effective in ensuring compliance and assisted companies to better document their R&D.

 Evaluation recommendations:

  • The 175% Premium and the R&D Tax Offset be evaluated again in 2009-10.
  • The Government consider the evaluation's finding in relation to the appropriateness of the current R&D expenditure threshold for the Offset and its impact on incentives.
  • The Guidelines for R&D Plans be reviewed and revised to provide better guidance. 


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