We can reveal that Australia’s New R&D Tax Credit program was given the official green light on Tuesday 23rd of August 2011 after passing through the Senate virtually unchanged.
The only amendments to the legislation proposed by the Labour Government in 2010 were the change of the start date of the legislation to 1 July 2011 and also the introduction of a quarterly payment system for SMEs receiving the refundable tax credit.
This means that small to medium companies with a turnover less than $20m that have been undertaking R&D activities since 1 July 2011 can now earn an increased benefit of 45% as a refundable tax credit, up from the previous 37.5% rate. Large companies also receive higher incentives with an increased benefit of 40% as a tax credit equating to around 10% compared with the previous 7.5% benefit.
For all companies intending to make claims under the New R&D Tax Credit it is important to know that this is an entirely new scheme with the rules substantially different to those known under the previous R&D Tax Concession or R&D Tax Offset schemes. Key changes include:
- new definition of eligible R&D
- new tests for supporting activities
- new application of feedstock rules
- new rules surrounding software R&D
- new rules surrounding overseas R&D
- new categorisation of expenditure for the ATO
- new application process
These changes affect all industries and will require all companies to examine current R&D activities to ensure compliance with the new R&D Tax Credit. However it is important not to rush into any review as AusIndustry will be providing important guidelines in the coming weeks and months that will help with the application of these new rules to specific industries.
Our suggestion in the meantime is to keep on business as usual, continue to keep good records for your R&D activities, particularly labour costs, and where possible, make time to sit with an R&D specialist in the next month or so to get advice for your business situation.
Although there are many changes, it will certainly be possible to obtain good benefits under the New R&D Tax Credit, and we look forward to providing you with more specific information as it comes to hand.
Please do not hesitate to contact us at [email protected] if you have any comments or queries. And don’t forget to put in your R&D claim for 2011 now.
