R&D credit a real boost (2/5)

A BDO Kendalls partner has praised the Federal Government’s proposed research and development tax concession, as it will provide clearer information about the financial rewards of innovation investment.
The reforms would come into effect from July 2010, offering 45 per cent refundable tax credits for small businesses with an annual turnover less than $20 million and a 40 per cent refund to companies that earn more than $20 million.
BDO Kendalls partner Tracey Murray, says the reforms are clearly seeking to motivate Australian businesses with an additional incentive to dedicate increasingly scarce resource to R & D activities.

“Faced with the challenges associated with keeping a burgeoning deficit under control, the government’s decision to commit $1.4 billion in spending on the R&D tax credit program over the next four years is a strong reaffirmation of the integral nature and pivotal role R&D plays in assisting businesses develop innovative ideas and products.”

She says larger companies with annual revenue of more than $20 million will save 10 cents on every dollar spent on eligible R & D activities. But clarification is needed about whether loss-making companies will be able to carry refunds forward.
“The current difficult economic conditions are likely to put some successful Australian businesses into temporary loss positions and, unless non-refundable R&D tax credits can be carried forward, many businesses will be denied the benefits of this initiative when they most need it.”

Murray advises companies that would benefit from the increased incentives of the changes to investigate holding off R & D expenditure until July 2010 to maximise their claims.

“It is encouraging that the Government is seeking industry consultation with respect to the redefinition of R&D from a taxation perspective - but it is essential the R&D tax credit scheme remains focused on incentivising businesses to achieve commercially focused outcomes,” she says.