Research and Development Legislation passed in Senate

The Government's new tax credit Bill (the Tax Laws Amendment (Research and Development) Bill) has passed the Senate (23 August 2011).

The Government’s new tax incentive for research and development (R&D) is implemented through the Tax Laws Amendment (Research and Development) Bill 2010 (Bill) which together with its supporting Bill, the Income Tax Rates Amendment (Research and Development) Bill 2010 creates a new R&D tax incentive with more generous benefits for eligible activities than the existing concession which the government says is better targeted towards R&D that benefits Australia. The government also contends that it is substantially simpler and accompanied by improved administrative arrangements.

The new R&D tax incentive system replaces the existing R&D Tax Concession for all income years starting on or after 1 July 2010.

The two core components of the new R&D incentive system are :

• 45% refundable R&D tax offset for eligible entities with a turnover of less than $20 million; and

• non-refundable 40 per cent R&D tax offset for all other eligible entities.

The government claims “a clearer and better targeted definition of eligible ‘R&D activities’ that will ensure that the incentive is available in circumstances consistent with the underlying rationale for government intervention”. The legislation amends the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Income Tax (Transitional Provisions) Act 1997, the Income Tax Rates Act 1986, the Taxation Administration Act 1953 and the Industry, Research and Development Act 1986.

Business reaction to the new measures has be to express concern at the level of compliance required, for example, the “Australian Industry Group has said that it remains unconvinced whether the new R&D bill can be effective supporting research in the manufacturing sector.” Read more

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