R&D Tax Incentive Passed
The long awaited changes to the tax laws relating to the R&D Tax Incentive have finally been passed with a retrospective start date of 1 July 2011.
The two main components of the credit are:
- A 45% refundable R&D tax offset for businesses with turnover of less than $20million.
- A 40% non-refundable R&D tax offset for all other businesses, with the ability to carry forward unused offset amounts to reduce future tax liabilities.
This effectively provides a 150% and 133% tax deduction respectively.
The new credit amends the previous legislation on several fronts including:
- The removal of the current $2 million annual expenditure limit on R&D that can now be claimed under the 45% refundable tax offset.
- Changes to the definition of R&D activities. Core R&D must now be experimental activities based on principles of established science.
- A new dominant purpose test that requires supporting activities to prove they support core activities.
- Companies that are up to 50% owned by tax exempt entities such as universities will be able to access the new credit subject to meeting the eligibility requirements. (The previous threshold was 25%).
- Foreign owned companies incorporated in Australia will now be eligible for the new incentive, in addition to Australian owned companies. This enables access to the incentive by companies undertaking R&D in Australia were the intellectual property is held overseas, provided that the company is conducting the R&D on its own behalf and where it has a substantial interest in the R&D activities.
If your business is involved in innovation, you should consider your eligibility for the R&D Tax Incentive. For an initial assessment or further information about the changes and how they affect your business, contact Brendan Brown on 03 9869 5900 or email brendanb@mprgroup.com.au
