Status: On 12 May 2009 the Government announced it will replace the existing R&D Tax Concession with a new R&D Tax Credit. The R&D Tax Credit is planned to come into effect from 1 July 2010.

In light of the feedback received on the exposure draft legislation released in December 2009, the Government has adopted a range of changes to make the legislation clearer and to remove unintended consequences.  A second Exposure Draft of the Legislation and Explanatory Materials (EM) was released on 31 March.

Description: The new R&D Tax Credit is a broad-based and market driven incentive package.  The two core components of the package are:

•  a 45 per cent refundable tax credit (the equivalent to a 150 per cent concession) for companies with an aggregated turnover of less than $20 million per annum;
• a 40 per cent standard tax credit (the equivalent of a 133 per cent deduction).

The new tax credit is decoupled from the corporate tax rate and thereby creates certainty in the level of assistance to be provided.  Firms undertaking R&D in Australia, where the intellectual property is owned overseas, will be eligible for the R&D Tax Credit.

An interim measure, prior to the introduction of the R&D Tax Credit, will increase the R&D expenditure cap for the R&D Tax Concession Offset from $1 million to $2 million for 2009-10. This demonstrates increased Government support for eligible small companies.

Information on the Government’s announcement of the R&D Tax Credit is available at the Minister for Innovation, Industry, Science & Research’s website www.minister.innovation.gov.au.

Information on the Government’s Innovation Agenda, Powering Ideas – An Innovative Agenda for the 21^st Century, is available at the Department’s website www.innovation.gov.au.