Australia’s Research and Development (R&D) Tax System was cited as “The Best in the World” by the Competitive Alternatives “2010 Special Report: Focus on Tax”, released recently by the global professional services firm KPMG.
The Australian Government replaced the complex and outdated R&D Tax Concession last year with a simplified R&D Tax Credit, which cuts red tape and provides a better incentive for business to invest in research and innovation.
The new system will be implemented this coming July 1, 2010, doubling the rate of government support for R&D conducted by firms that earn less than $20 million.
Senator Kim Carr, the Australian Minister for Innovation, Industry, Science and Research, said, “This places our new R&D Tax Credit ahead of other tax credits offered in Canada, United States, France, Italy, Japan and Mexico. It also ranks higher than the R&D assistance provided in the Netherlands and the United Kingdom.”
The Minister added that the new R&D Tax Credit is more generous for all eligible businesses, better targeted at R&D deserving of public support and boosts support for small and medium enterprises.
He said that smaller firms could take this benefit in cash if they end the year in a tax loss, allowing more small innovative firms to get an immediate contribution towards their R&D, even if they are not yet turning a profit.
What is more important, Senator Carr said in an earlier press statement, the new R&D Tax Credit would better reflect the financial realities facing many businesses during the global recession. It will help ensure that Australian businesses could take full advantage of generous incentives to innovate during the global recovery.
The new Tax Credit provides a 45 per cent refundable credit for firms with an annual turnover of less than $20 million – equivalent to a Tax Concession of 150 per cent. This means that firms will receive a tax refund of 45 per cent of their R&D spending when they file their tax return.
This measure effectively doubles the standard level of support for innovative small and medium sized companies. The measure reverses the previous government’s retrograde decision to cut the R&D Tax Concession in half when it came to office.
The refundable credit will be available to small companies in tax loss, with no limit on the level of R&D expenditure they undertake. This will provide a real boost to start-up companies in areas such as biotechnology and ICT.