Australian govt changes R&D tax cut to benefit startups, SMEs

Under new changes to tax breaks, big businesses will no longer be able to claim their R&D costs, with the savings going to smaller ones.
Written by Michael Lee, Contributor

The Australian government is changing how the Research and Development (R&D) Tax Incentive will work in order to bring tax breaks to Australian startups and medium-sized enterprises that need it more.

New eligibility restrictions will mean that businesses with an annual turnover of $20 billion or more will have to claim their R&D activities under regular tax provisions.

"The change will affect less than 20 corporate groups, and will ensure this support is better targeted at small to medium businesses," Treasurer Wayne Swan said on Sunday.

For companies that have an annual turnover of less than $20 million and are conducting eligible R&D can apply to receive a fully-refundable offset if they are in tax loss. The R&D Tax Incentive is currently capped at 45 percent.

From next year, eligible businesses will also be able to receive tax refunds as quarterly credit in order to help improve cash flow.

Businesses falling between $20 billion and $20 million in turnover will continue to be taxed under existing arrangements, a spokesperson from the Department of Industry and Innovation said.

The government says that the savings from the changes are estimated to be over $1 billion from 2014 to 2017, and will go towards additional initiatives aimed at helping small to medium enterprises innovate.

Editorial standards