Federal Budget 2009 - R&D tax credit
Current R&D tax concession
Under the current provisions, companies that incur expenditure on eligible
R&D activities are entitled to receive an accelerated rate of deduction of
125% on certain R&D related expenditure (eg. wages, direct R&D costs, other
apportioned overhead costs etc). Expenditure incurred on R&D plant and
equipment is also eligible for effective life depreciation at 125%. In
addition, an incremental concession of 175% applies where companies increase
their level of R&D expenditure (based on an average over the preceding 3
years). A threshold of $20,000 for minimum R&D expenditure applies, with an
upper expenditure cap of $1m. Small companies (turnover < $5m) have the
choice to claim a refundable tax offset instead of an R&D deduction.
New R&D tax credit
The Government has announced a replacement of the existing R&D Tax
Concession. The new R&D Tax Credit system will apply for the 2011 financial
year.
Turnover less than $20m
The new R&D Tax Credit provides a 45% refundable credit for companies with
turnover less than $20m. This is equivalent to a tax concession of 150%.
This means that small companies will receive a tax refund of 45% of their
R&D spending at the time of lodgement of their income tax return. The
refundable credit will be available to small companies in a tax loss
position, with no limit on the level of R&D expenditure undertaken.
Turnover greater than $20m
Companies with turnover greater than $20m will receive access to a 40%
non-refundable credit. This is equivalent to a tax concession of 133%. A
transitional measure for 2010 will raise the expenditure cap for the
existing R&D Tax Offset from $1m to $2m. The cap is the maximum amount a
company can spend on R&D to be eligible for the Tax Offset.
Changes to eligibility criteria
Under the new system, the eligibility criteria will be tightened. The
Government will be consulting further in development of legislation for the
new system. A consultation paper is to be released in the next few months.
Published : 13 May 2009
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