The new R&D tax credit bill finally passed through the Senate today but industry groups remain unconvinced as to its effectiveness in supporting research and development in large swathes of the economy. The legislation will start retrospectively from 1 July 2011. The two core components of the Credit are a 45 per cent refundable R&D Tax Credit for small firms with turnover of less than $20 million and a 40 per cent non-refundable R&D Tax Credit for all other firms. The Credit effectively doubles the support for small firms to 15 cents in the dollar and increases support for all other firms by a third, to 10 cents in the dollar.
R&D has a key role in lifting Australia’s flat-lining productivity performance, and the tightening of eligibility has come at a time when manufacturing is finding it hard to attract investment in general. The take-up and effectiveness of the scheme will be closely monitored and future amendments are likely.
The new R&D Tax Credit will help businesses in every sector of the Australian economy transform and invest in the future – leading to more high-wage, high-skill jobs. Companies need to embrace innovation to remain competitive. Future job creation should come as companies transform and adopt new practices. Putting it simply, firms that innovate will survive and be the market leaders of tomorrow.
