AVCAL welcomes better targeted R&D tax breaks

21 June 2011

The Australian Private Equity and Venture Capital Association (AVCAL) welcomes the commitment by the Federal Government to reshape the research and development tax concession framework to better support true R&D in small and medium-sized businesses.

AVCAL CEO Dr Katherine Woodthorpe said: “Tightening up the eligibility requirements for the R&D tax concessions now means that most of the tax breaks will go to genuine R&D initiatives rather than some of the ‘business as usual’ programs of big business.

“Innovation sits at the core of Australian enterprise. Venture capital is a key source of funding for Australian innovators. Our industry members and the companies they invest in see research and development as a vital and fundamental component of their businesses.

“R&D is time consuming and expensive but is essential to ongoing innovation and success in business. The Australian venture capital industry funds many of the businesses that lack the capacity to obtain traditional sources of capital. This new tax measure is an important acknowledgment of the true value that innovation and genuine R&D bring to our national economy and wellbeing.”

Businesses that genuinely use R&D as an investment for future growth will be able to benefit from access to a 45 per cent refundable tax credit (to companies with an aggregated turnover of less than $20 million) and a 40 per cent non-refundable offset (to all others).

These benefits will be delivered in quarterly payments to small and medium businesses from 1 January 2014. AVCAL is pleased to see the key recommendations contained in its submission earlier this year to the Government’s first exposure draft of the Tax Laws Amendment (Research and Development) Bill 2010 have been accepted in the proposed legislation.

The R&D tax credit was announced as part of the Governments Innovation Agenda, ‘Powering Ideas – An Innovative Agenda for the 21st Century.’ The R&D tax credit will deliver $1.8b annually benefitting over 5,500 small businesses.

Foreign companies holding IP overseas, conducting their R&D in Australia may also be eligible to apply for the R&D tax credit. AVCAL looks forward to the new tax measures for R&D becoming law once the legislation passes the Senate sometime after July.

Media contact - Stuart Snell, ph +61 (0)2 8243 7001, (0)416 650 906, stuart.snell@avcal.com.au