Australia's new R&D Tax Credit makes Melbourne, Victoria one of the most attractive locations in the world for R&D.

The R&D Tax Credit replaces the R&D Tax Concession as Australia's principal initiative to support research and development.  The new tax credit will apply to income years beginning on or after 1 July 2011.

R&D Tax Credit for Companies with Turnover Less Than AUD$20 million.

Where a group’s annual turnover is less than $20 million, companies will be eligible for a 45% refundable credit, with no limit on the amount of expenditure claimable under this program. This is a significant increase from the existing limit of $5 million and the abolishment of a cap.

R&D Tax Credit for Companies with Turnover Greater Than AUD$20 million.

Where group turnover is over $20 million, companies will be eligible for a 40% non-refundable credit, equivalent to a 133% tax concession, one-third higher than the current basic rate of support.

Further, companies conducting R&D in Australia where intellectual property rights are held offshore (as for the current international premium R&D concession) will also be able to access this credit.

What is the difference between a refundable and non-refundable tax offset?

Tax offsets are applied directly to a company's income tax liability to reduce the amount of a tax they have to pay.

The 45% R&D Tax Credit will be a refundable tax offset, which means that if a company's tax liability is reduced to zero, companies may be entitled to a refund of any unused offset amount.

The 40% R&D Tax Credit will be a non-refundable tax offset, which means that companies cannot access a refund for any unused offset amount if their liability has been reduced to zero.  However any excess offsets may be carried forward for use in future income years.

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Innovation Australia is an independent statutory body established to assist with the administration of the Australian Government's innovation and venture capital programs, including administration of the R&D Tax Credit.