The Federal government was unable to have its new research and development legislation passed by the Senate, prior to the Senate rising for the winter recess.
The new legislation was scheduled to commence on the 1st July 2010. The government is saying that the legislation will be reintroduced when the Senate next meets; with a retrospective date back to the 1st July 2010. Many commentators however have raised strong objections to retrospective legislation. Also, it is far from certain that the legislation will be passed by the Senate as the Opposition has a number of outstanding issues relating to the legislation. It would appear that, at this stage, the best advice is that the current research and development scheme is the scheme that was operating up to 30th June 2010 i.e:
- for companies with turnovers under $5M – R & D expenditure up to $2M can be claimed at 125% of R & D expenditure or 175% for the excess over a three year average;
- if the company is trading at a loss – a rebate calculated at 37.5% of actual R & D expenditure, will be paid by the Australian Taxation Office; and
- if the R & D expenditure has exceeded a three year average – that component will be paid at 52.5%.
For companies with turnovers in excess of $5M, it is recommended that you continue to claim R & D expenditure at 125% or, for the component applicable, at 175%.
If you are planning a major research and development project and you were relying on the proposed new legislation, (companies with turnovers under $20M were to receive a tax rebate of 45 cents in the dollar on the R & D expenditure and companies with turnovers of $20M + were to receive a taxation credit of 40 cents in the dollar of the R & D expenditure) we recommend that, before committing substantial funds to research and development projects, you contact you accountant for advice.
Article by Christie Lewis
Christie is Practice Manager at Alan Lewis Accountants . Besides accounting, her passion is for all things small business (and blogging, of course). You can contact Christie directly at christie@lewistaxation.com.au.
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