Small businesses to win from changes to R&D tax support

Small to medium firms are set to benefit from changes to tax incentives for research and development following the government's announcement yesterday to cut big businesses from the R&D tax incentive program.

The tax incentive, which helps businesses offset part of the costs of undertaking R&D, was previously open to firms of all sizes in all sectors who are conducting eligible R&D. Before the announced changes, the incentive consisted of a 45 per cent refundable tax offset to firms earning less than $20 million annually and a non-refundable 40 per cent tax offset to all other firms.

Under the changes, firms with turnover of $20 billion or more will no longer be eligible for the incentive and will be able to claim R&D expenditure under general tax law provisions.

Instead, SMEs engaged in R&D activities (companies turning over less than $20 million annually) will now be able to enjoy an uncapped, fully-refundable offset if they are experiencing a tax loss. From 1 January 2014, they will also be able to receive 45 cents for every dollar spent on R&D, equating to a 150 per cent tax deduction.

The change is estimated by Deputy Prime Minister and Treasurer Wayne Swan to affect only a handful of corporations in Australia.

"The R&D Tax Incentive is one of the most important elements of the Government's support for our innovation system. It will continue to provide generous, easy-to-access support for around 10,000 companies each year who are undertaking eligible R&D. The change will affect less than 20 corporate groups and will ensure this support is better targeted at small to medium businesses," said Mr Swan.

This forms part of a proposal by the Gillard government, A Plan for Australian Jobs, to strengthen the ability of Australian companies to win more work domestically, to increase exports and support the growth of SMEs.

To stay up-to-date with the latest in government grants and incentives, view D&B's Small Business Grants Update here >>

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