Additional advantages

The Australian government currently offers some incentives to undertake R&D activities in Australia, in addition to the very straight forward regulatory aspects (CTN acknowledgement).

The R&D Tax Incentive replaces the R&D Tax Concession from income years starting on or after 01 July 2011. Legislation implementing the new program passed the Australian Parliament on 24 August 2011 and received Royal Assent on 8 September 2011.

Objective

The government supports investment in research and development (R&D), because it is essential to strengthening Australian companies, so they become more innovative, productive and prosperous and are better able to create jobs for the future.

The R&D Tax Incentive assists firms by being better targeted, more generous, more predictable and less complex.

The key benefits are:

  • Increased financial support to more companies through more generous assistance for conducting eligible R&D activities.
  • Providing support to companies in tax loss through cash refunds.
  • Redistributing support in favour of small and medium enterprises (SMEs) which are more responsive to fiscal incentives.
  • Targeting genuine R&D.
  • Increasing certainty by decoupling the incentive from the company tax rate.
  • Removal of requirements to hold resulting intellectual property in Australia.

The objective of the R&D Tax Incentive is to encourage industry to conduct research and development activities. This is achieved by providing a tax incentive for industry to conduct, in a scientific way, experimental activities for the purpose of generating new knowledge or information in either a general or applied form including new knowledge in the form of new or improved materials, products, devices, processes or services.

Elements

The R&D Tax Incentive has two key components:

45% refundable R&D tax offset:

Available to eligible companies with an aggregated turnover of less than $20 million

Refundable for companies in tax loss (providing an upfront cash refund)

40% non-refundable R&D tax offset

Available to all other eligible companies

Companies can carry forward unused credit amounts for use in future years

From 1 January 2014, a new element to the R&D Tax Incentive, Quarterly Credits, will be open for companies with a turnover of under $20 million. Quarterly Credits will allow SMEs to access their R&D tax incentive in the year in which they make their investment in R&D. Quarterly credits will further improve cash flow of SMEs and provide an added incentive to invest in R&D.

Legislative Basis

The legislation which enables the R&D Tax Incentive is contained in the Tax Laws Amendment (Research and Development) Act 2011.

Further Information

The R&D Tax Incentive is administered jointly by Innovation Australia (assisted by AusIndustry) and the Australian Taxation Office. Detailed information on the program is available from:

AusIndustryPhone: 13 28 46 Email: hotline@ausindusty.gov.au

Australian Taxation OfficePhone: 13 28 66 Email: innovationtax@ato.gov.au