R&D cash boost for small tech companiesDOWNLOAD
The budget will deliver a research and development (R&D) windfall to companies with a turnover of less than $20 million. The new R&D tax credit which will replace the existing R&D tax concession effective from 1 July 2010 will provide greater benefit to eligible companies.
The new system provides a refundable credit of 45% of the R&D spend for these smaller businesses, an effective after tax benefit of 15% as opposed to the 7.5% under the existing regime. The new system has no qualifying limit so the R&D credits will apply from the first dollar of expenditure.
Deloitte Tax Partner and Telecoms Media and Technology specialist, Stuart Osborne said:
“This should provide a huge boost to Australia’s grass roots technology companies. Typically the R&D spend undertaken by these start-ups and smaller companies would generate tax losses which are of no benefit until the company makes a profit.”
“Crucially, under the proposed scheme R&D undertaken by a company yet to turn a profit would get the R&D credit as a cash payment, effectively refunding part of the R&D cost.”
If a company, in tax losses, spent $250,000 on R&D today and they met the eligibility requirements around group turnover being less than $5m, they would get a cash rebate of $93,750. From 1 July 2010 if the same company was in tax losses, and group turnover was up to $20m, they will get a cash amount of $112,500.
“This is a much more targeted way of delivering the benefit to a larger number of companies which will be welcomed by the technology sector,” continued Osborne. “Even for companies who are already profitable the new scheme will provide a greater benefit than that which already exists.”