Australia to Offer 40% R&D Tax Credit to Foreign Groups

Foreign companies will be able to claim 40 cents for every dollar invested in research and development under new rules to be introduced by the Australian government.
 

Senator Kim Carr, the minister for innovation, industry, science and research, said companies would be eligible even if the intellectual property were owned outside Australia. "This is the biggest increase since records began and the biggest change to business innovation support in more than a decade," he said.
 

The 40 per cent tax credit, to be introduced from July next year, would offer "more generous and more predictable incentives for doing R&D in Australia", he told the Financial Times yesterday.
 

The scheme, to be managed through the Australian tax-return system, would have no turnover limit.
 

"People in the public research and innovative business sectors have praised us for increasing funding [in the recent federal budget] despite the global recession," said Mr Carr.
 

"They're missing the point. We aren't making these investments despite the downturn - we're making them because research and innovation are the key to accelerating recovery."
 

Mr Carr said the Labor government came to office at the end of 2007 aware that Australia "was falling behind in the race to the top". The rise of innovators such as Russia and, in particular, China was threatening to see Australia slip back even further.
 

Mr Carr said the government had a 10-year strategy to boost Australia's innovation capacity and performance. Last week's federal budget included A$3.1bn ($2.3bn, €1.7bn, £1.5bn) in new money for research and innovation, with total fundingto reach almost A$8.6bn in the financial year beginning in July.
 

Mr Carr said the R&D tax credit would replace the complicated and outdated R&D tax concession.
 

Under the old system, foreign companies had to apply for an "international premium" for reimbursements. Industry feedback showed that the unpredictability of the system provided little or no incentive for companies to invest in new projects, or for multinationals to locate their R&D in Australia.
 

According to figures seen by the FT, in 2007-08 fewer than 20 companies registered for the premium.