August 2007
Evaluation report on new elements of the Australian Government’s R&D tax concession
On 11 July 2007, the Government released a report, New Elements of the R&D Tax Concession - Evaluation Report, which evaluates the then new elements of the Australian Government’s research and development (R&D) tax concession that were introduced in 2001. The elements evaluated in the report are the R&D Offset, the 175 per cent Premium Concession and the R&D Plan Requirements.
The R&D Offset is available to eligible companies who spend up to $1 million on R&D per annum and have group turnover of less than $5 million. It provides a cash rebate equivalent to 30 per cent of the deductions otherwise available under the basic R&D tax concession and is particularly useful to companies with tax losses, as they can obtain cash back from the Government instead of merely generating additional carry forward losses.
The report concluded that the R&D Tax Offset has generated considerable additional R&D spending by companies eligible for the R&D Offset. However, the report also noted Australian Tax Office concerns that there may be businesses that are claiming the offset in respect of expenditure that may never be paid, although the incidence of such cases is not specified. Accordingly, claimants should be prepared to provide objective and persuasive evidence that all amounts claimed under the R&D Offset have been paid, or if they have not, that the expenditure has been properly incurred and payment will be made in the future.
The report concluded that the $1 million threshold constrained R&D Offset claimants from increasing R&D spending above the threshold. As a result, the report recommended that the threshold be reviewed and that alternative mechanisms which encourage R&D Offset claimants to increase R&D spend above the threshold should be considered.
For further information, please complete the following form, or contact:
Sandra Mason, Partner
PricewaterhouseCoopers Tax
Research & Development
Phone: +61 2 8266 0470
