The bills to establish the new R&D Tax Incentive received royal assent on 8 September 2011.
The R&D tax incentive regime will replace the existing R&D tax concession, R&D tax offset, 175% premium concession and the 175% international concession.
While the new regime was originally intended to apply from 1 July 2010, delays in passage of the legislation have resulted in it applying from 1 July 2011.
R&D tax incentive for companies with turnover less than $20 million
Companies in groups with annual turnover of less than $20 million will be eligible for a 45% refundable offset, with no limit on the level of expenditure claimable. If a company’s tax liability is reduced to zero, it may be entitled to a refund of any unused offset amount.
There is no limit on the level of expenditure claimable.
This is in contrast to the previous program which was limited to group turnover of $5 million and aggregate R&D expenditure of only $1 million.
Based on a corporate tax rate of 30%, this 45% offset represents a 15c per $1 additional benefit as compared to the 7.5c per $1 offered by the previous program. So, the benefit has effectively doubled!
R&D tax incentive for companies with turnover greater than $20 million
Companies in groups with annual turnover in excess of $20 million will be eligible for a 40% non-refundable offset, with no limit on the level of expenditure claimable. If a company’s tax liability is reduced to zero, any excess offsets may be carried forward to future income years.
Based on a corporate tax rate of 30%, this 40% offset represents a 10c per $1 additional benefit as compared to the 7.5c per $1 offered by the previous program. So, the benefit has effectively increased by a third.
Companies that are part of an international group
Where a company is part of an international group, and undertakes R&D in Australia while the relevant intellectual property rights are held offshore, it will have access to the new regime.
Transitional provisions for the existing R&D tax offset
Companies claiming the existing R&D tax offset in the 2010 and 2011 years will enjoy an increase in the aggregate R&D expenditure limit from $1 million to $2 million, but with the $5 million group turnover limit remaining.
How Can We Help?
We provide consulting services ranging from general advice on the Research and Development (R&D) tax incentive, through to full preparation and lodgement of applications and their underlying assessment and documentation.
Our services include “hands-on” assistance, or simply advice, in relation to:
- R&D project identification
- R&D strategy and management
- R&D plans
- R&D application, documentation and lodgement
- R&D cost identification and tracking
- Liaison with the ATO and AusIndustry
- Audit assistance
If you are uncertain about whether or not your activities and expenditure will qualify, we would welcome the opportunity to discuss your circumstances with you.