On 24 August 2011 the bills to establish the long awaited R&D Tax Credit were passed by Parliament. The final step in the legislative process is Royal Assent by the Governor-General. AusIndustry and the ATO, as administrators of the R&D Tax Credit, will release guidance material for the program following Royal Assent.
The R&D Tax Credit legislation will be supported by Regulations and Decision-making Principles. Application forms will not be available until the Regulations have been finalised.
The new R&D Tax Credit will replace the R&D Tax Concession and provides eligible companies with a tax offset for expenditure on eligible R&D activities. The two components of the program are:
- a 45 per cent refundable tax offset available to companies with an aggregated turnover of less than $20 million; and
- a 40 per cent non-refundable tax offset available for all other companies
The start date for the new program will be for expenses incurred after 1 July 2011. It also announced the introduction of quarterly payments for small and medium businesses from 1 January 2014.
How do the R&D Tax Concession and R&D Tax Credit compare?
The R&D Tax Credit is simpler, fairer and more accessible than the R&D Tax Concession. Key features of the new program include:
- more generous benefits, in particular for SMEs;
- a clearer definition of research and development activities;
- expanded access to foreign companies who undertake R&D in Australia and to companies that hold their intellectual property offshore; and
- greater certainty in R&D investment, with companies able to seek an advance finding from Innovation Australia where they are uncertain of the eligibility of the activity.
Like the R&D Tax Concession, the R&D Tax Credit:
- is a broad based market driven program accessible to all industry sectors;
- operates on a self assessment basis, allowing companies to determine for themselves whether activities conducted are eligible R&D activities;
- will be jointly delivered by Innovation Australia (assisted by AusIndustry) and the ATO; and
- requires companies to register their activities annually within 10 months after the end of the income year in which the activity was conducted.