Australia now an attractive destination for research and development intensive start-ups, says KPMG 13/05/2009 The 2009 Federal Budget revealed a $1.4 billion research and development (R&D) tax credit scheme that will double the level of assistance currently available to small companies and remove the cap on the amount of R&D expenditure subject to a tax credit, helping Australia keep it’s competitive edge. The Government outlined its innovation agenda for Australia over the next decade in Powering Ideas: An Innovation Agenda for the 21st Century, supported by a $3.1 billion boost in funding over the next four years. The Budget package announced a major overhaul of the tax concession and introduced a more attractive R&D incentive, which will benefit both SMEs and large companies. David Gelb, KPMG R&D Incentives Partner, believes that "the proposed R&D credit will elevate Australia to a globally competitive position, which should enable it to attract world class R&D projects." From 2010-11 a two-tiered R&D credit will replace the R&D tax concession system. “Large companies with more than $20 million annual turnover will receive a 40% R&D tax credit instead of tax deductions, which is a 10% net - benefit - one third higher than the current regime. Small companies will receive a 45% R&D tax credit, which amounts to a 15% benefit - twice the current level,” said Mr. Gelb. "This is great news and it means businesses can begin to plan their future R&D projects with certainty, thus enabling them to invest in opportunities which will be commercialised as we emerge from the current recession," Gelb said. Small companies with tax losses will be able to ‘cash out’ their R&D credit when they file their income tax return. The Budget also shows that Government is continuing to support Innovation by offering a range of targeted direct grant assistance programs and support for collaborative research between business and universities. "What we are seeing with these changes to R&D is a clear recognition by the Government of the inextricable link between R&D and long-term sustainable economic growth. The Government is incentivising to behaviour that benefits and relieves companies immediately and providing long-term stimulus which gives a meaningful competitive advantage. Businesses need to embrace this." Further information Natalie Causley Communications Manager KPMG 02 9295 3851 / 0410 838 914 ncausley@kpmg.com.au