‘There has never been a more exciting time to be an Australian’ is the very first sentence of the well publicised innovation statement released by the Turnbull Government on 7 December, 2015. The purpose of this bold statement is to demonstrate a firm belief by the Government in the innovation potential of Australia and a commitment to the cause of promoting a post-mining era ‘ideas boom’ through initiatives worth $1.1 billion over four years. The statement is focused on four pillars: culture and capital, collaboration, talent and skills, and “government as an exemplar” with an overarching long-term goal of encouraging ‘a culture that backs good ideas and learns from taking risks and making mistakes.’

A key government measure to promote ideas at their root stage is the R&D Tax Incentive, which is a broad based program that provides a tax offset to eligible companies at a rate over and above that of a normal tax deduction. The Incentive can see eligible businesses obtain tax offsets of up to 45% of R&D spend, with some of this potentially refundable in cash for businesses with grouped annual turnover of less than $20 million.

R&D activities can involve design and development of new products, processes, platforms or services, or those that are above and beyond the capabilities of their predecessors. Expenses that are eligible for the R&D tax offset include cost incurred on salary and wages, direct prototype costs, travel, contractor costs and other business overheads applicable to the registered R&D activities.

In order to apply for the R&D Tax Incentive, companies are required to lodge an R&D Application within 10 months of their financial year end. Therefore, a company that undertook eligible R&D activities at any stage during the 2015 financial year is able to access the tax offset through lodging an Application form by 30 April 2016. We assist over 1000 companies nationally with this, with over 300 of these out of the Sydney area.

Further to the R&D Tax Incentive, the statement references a desire to introduction of tax breaks for early stage (angel) investors in order to promote investment in innovative start-ups with high growth potential. These tax breaks include: a 20% non-refundable tax offset on investments (capped at $200,000 per investor per year) and a 10 year exemption on capital gains tax, provided investments are held for three years. The new arrangements are not yet officially law but, if passed as such, are expected to commence from 1 July 2016.

For further information please contact: 

Mitch Eady

PwC R&D Manager 

 

P: 02 8266 4991

E: mitch.eady@au.pwc.com

Aaron LePoidevin 

PwC R&D Partner 

P: 02 8266 0215

E: aaron.lepoidevin@au.pwc.com