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Tax Concessions Have Boosted Australian R And D, Government Claims

by Mary Swire, Tax-News.com, Hong Kong

13 July 2007


Australian businesses are investing record amounts in research and development since changes to the Research And Development Tax Concession were introduced in 2001, according to Australian Industry Minister, Ian Macfarlane.

An evaluation report released on Wednesday by Macfarlane reveals that business expenditure on R&D (BERD) reached a record A$8.4 billion (US$7.2) in 2004-05.

"This represents a A$2.5 billion increase since the introduction of the Howard government's 175% Premium and Tax Offset," Macfarlane stated.

"The premium has proven to be extremely popular with more than 900 firms benefiting from the concession and R&D expenditure soaring to around A$379 million a year," he added.

The 175% Premium provides a tax concession for additional R&D expenditure above a three-year average to encourage firms to increase their spending on innovation research and development.

Mr Macfarlane revealed that further changes to the beneficial ownership test for the premium, announced in the Industry Statement, are expected to increase R&D expenditure by an extra A$1 billion over the next four to five years.

The evaluation also found that the Tax Offset was proving to be a great incentive to innovate, with an extra 1,000 small Australian firms investing in R&D.

"The Tax Offset has boosted R&D expenditure by about A$310 million a year, representing a doubling of R&D expenditure by start up firms,” it stated.

The Tax Offset helps start-up ventures overcome the challenges of obtaining finance for R&D by enabling firms in tax loss to cash out their future deduction under the Tax Concession.

“The evaluation shows the Howard government’s innovation policies are achieving results and providing a strong platform for business to invest in R&D with confidence," Macfarlane claimed.


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