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R&D cash boost for small tech companies


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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.”

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Contacts

Name:
Jane Kneebone
Company:
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Phone:
Tel: +61 3 9671 7389, Mobile: +61 416 148 845
Email
jakneebone@deloitte.com.au
Name:
Stuart Osborne
Company:
Deloitte Australia
Job Title:
Partner, Tax
Phone:
Tel: +61 2 9322 5912
Email
stosborne@deloitte.com.au

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