New R&D tax credit to boost Australian research

After more than two years of uncertainty over the fate of Australia’s new R&D Tax Credit, the relevant bills have been passed by Parliament with the support of the crossbench senators and await Royal Assent. The new program commenced on July 1, 2011 (instead of the original start date of 1 July 2010).

The Tax Credit (replacing the R&D Tax Concession) comprises:
• a 45% refundable R&D tax offset for taxpayers with a turnover of less than A$20 million  ($20.9 million); and
• a non-refundable 40% R&D tax offset for all other taxpayers.

The object of the Tax Credit is to encourage industry to conduct R&D activities that might otherwise not be done because of an uncertain return from the activities, in cases where the knowledge gained is likely to benefit the wider Australian economy, says local law firm DLA Piper Australia. 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.”