SECTION 2
OUR PROGRAMS
OVERVIEW
Innovation Australia aims to promote the development and improve the efficiency and international competitiveness of Australian industry by encouraging research and development, innovation and venture capital activities. InnovationAustralia is involved in the administration of Australian Government programs designed to stimulate investment, innovation through research and development (R&D) and commercialisation.
These programs are:
· R&D Tax Concession
· Green Car Innovation Fund (GCIF)
· Innovation Investment Fund (IIF)
· Innovation Investment Follow-on Fund (IIFF)
· Commercialisation Australia (CA)
· Climate Ready
· Re-tooling for Climate Change
· Commercialising Emerging Technologies (COMET)
· Early Stage Venture Capital Limited Partnerships (ESVCLP)
· Venture Capital Limited Partnerships (VCLP)
· Pooled Development Funds (PDFs)
· Renewable Energy Equity Fund (REEF)
· Pre-Seed Fund (PSF)
· (ACIS Stage 2) Motor Vehicle Producer (MVP) R&D Scheme
· Commercial Ready
· Renewable Energy Development Initiative (REDI)
· Industry Cooperative Innovation Program (ICIP)
· R&D Start
Together these programs form a suite of initiatives designed to encourage Australian industrial R&D and innovation efforts, to assist in the successful commercialisation of R&D outcomes.
A committee structure is used to help Innovation Australia administer its programs.
Information on agreements entered into for programs subject to the Industry Research and Development Act 1986 is contained in the appendices to the Innovation Australia Annual Report. This information is also available at www.innovation.gov.au.
R&D TAX CONCESSION
ESTABLISHMENT
The R&D Tax Concession was introduced in 1985 to encourage Australian industry to undertake increased levels of eligible Research & Development (R&D). It is an entitlement program that assists and encourages business R&D activities undertaken in Australia.
The program is based on the legislative framework contained in Part IIIA of the Industry Research and Development Act 1986 (IR&D Act) and sections 73B to 73Z of the Income Tax Assessment Act 1936. Inaddition, the Income Tax Assessment Act 1997 is relevant to calculating deductions for plant and other assets for use in R&D. The R&D Tax Offset and the R&D Incremental (175 per cent Premium) Tax Concession were introduced following the Australian Government’s Backing Australia’s Ability statement in January 2001.
Further changes to the R&D Tax Concession were made in May 2007, including changes to the beneficial ownership provisions extending access to the 175 per cent Premium to Australian companies in a multinational enterprise group who undertake their R&D in Australia, but hold the intellectual property overseas.
For income years commencing 1 July 2009 the grouped expenditure threshold for the R&D Tax Offset was increased from $1 million to $2 million.
OBJECTIVES
Through the R&D Tax Concession, the Australian Government aims to achieve its broader objective of developing internationally competitive industries in Australia by:
· encouraging the development by eligible companies of innovative products, processes and services
· increasing investment by eligible companies in defined R&D activities
· promoting the technological advancement of eligible companies through a focus on innovation or high technical risk in defined R&D activities
· encouraging the use by eligible companies of strategic R&D planning
· creating an environment that is conducive to increased commercialisation of new processes and product technologies development by eligible companies.
PROGRAM PERFORMANCE AND OUTCOMES IN 2009-10
REGISTRATIONS
Beneficiaries of the R&D Tax Concession must apply annually to Innovation Australia (via AusIndustry) for registration of activities undertaken in the previous income year. Eligible companies may lodge registration applications during the10months after the end of their income year, and then claim the tax concession for R&D in their annual tax returns filed with the Australian Taxation Office.
Data shown in this report on registrations for the 2009-10 income year as at 30 June 2011 are incomplete; further applications for the 2009-10 income year will continue to be received up to 31 October 2011 from companies with non-standard income period balance dates.
Figure 2.1 Summary of registration data from 1985-86 to 2009-10 as at 30June2011 (incomplete data for 2009-10)
Figure 2.1 data set
As at 30 June 2011, there were 8,614 companies registered for the 2009-10 income year, with reported R&D expenditure totalling $16.55 billion (Figure2.1).
A service delivery performance of 98 per cent of applications registered within the target of 30 days was achieved during 2010-11, with 90 per cent of electronically submitted applications registered within the target of 10 days.
Figure 2.2 Registration by R&D expenditure (%) for 2009-10, as at 30 June 2011 (incomplete year)
Figure 2.2 data set
Note: As at 30 June 2011, 8,614 companies were registered for the 2009-10 income year, with reported expenditure of $16.55 billion.
The distribution of company registrations by reported R&D expenditure for the 2009-10 income year is shown in Figure 2.2
The majority of companies (58 per cent) reported R&D expenditure of less than $500,000, representing approximately six per cent of total reported R&D expenditure. R&D activities valued at greater than $10 million were undertaken by around three per cent of registrants, representing approximately 58 per cent of the total reported R&D expenditure.
Figure 2.3 R&D expenditure ($m) by field of research (Australian Standard Research Classification) for 2009-10, as at 30 June 2011 (incomplete year)
Figure 2.3 data set
(a) A company’s R&D activities may relate to more than one Australian Standard Research Classification (ASRC).
Figure 2.3 shows that the top three areas of research conducted by users of the R&D Tax Concession for the 2009-10 income year, measured as reported R&D expenditure against Australian Standard Research Classification (ASRC), are Engineering and Technology, Information Computing and Communication Sciences, and Medical and Health Sciences.
PROGRAM ELEMENTS
The R&D Tax Concession allows eligible Australian companies undertaking defined R&D activities to claim a tax deduction of up to 125 per cent of eligible R&D expenditure when lodging their annual tax returns. Companies determine the eligibility of their R&D activities under self-assessment, with compliance monitored by AusIndustry on behalf of Innovation Australia.
The R&D Tax Offset is available to eligible Australian companies with an annual group turnover of less than $5 million and annual group R&D expenditure of up to $2million. Smaller companies in tax loss that would otherwise carry forward R&D related tax losses can realise these losses as a cash equivalent payment when their tax return for the relevant year is processed. This provides assistance to these smaller companies at the time they need it most, in their growth stages.
The R&D Incremental (175 per cent Premium) Tax Concession encourages additional investment in R&D. The 175 per cent Premium is available to eligible Australian companies on the part of their eligible labour-related R&D expenditure that is greater than a base level determined by their average R&D expenditure over the previous three years. Companies must provide evidence of three prior years of eligible expenditure on R&D. Grouping rules apply, as well as certain expenditure rules and anti-avoidance mechanisms.
In addition, changes to the beneficial ownership provisions were announced in May2007 that provided access to a R&D Incremental (175 per cent International Premium) Tax Concession to subsidiaries of multi-national enterprises, effective from1 July 2007.
Table 2.1 Registrants for 2008-09 and 2009-10 as at 30 June 2011a
Total registrants / 8,567 / 18,076.23 / 8,614 / 16,546.60
125% R&D Tax Concession / 3,307 / 5,248.31 / 3,185 / 6,504.60
R&D Tax Offset (A) / 2,900 / 933.35 / 3,161 / 1,053.90
175% Premium (B) / 1,651 / 10,806.28 / 1,508 / 7,750.70
International Premium (C) / 54 / 517.60 / 43 / 675.40
Tax Offset and 175% Premium (D) / 633 / 322.16 / 706 / 417.70
Tax Offset and Internat. Premium (E) / 4 / 1.30 / 3 / 2.00
175% Premium and Internat. Premium (F) / 18 / 247.23 / 8 / 142.30
175% Premium and Tax Offset and Internat.Premium (G) / 0 / 0.00 / 0 / 0.00
Total Tax Offset * / 3,537 / 1,256.81 / 3,870 / 1,473.60
Total 175% Premium ** / 2,302 / 11,375.67 / 2,222 / 8,310.70
Total International Premium *** / 76 / 766.13 / 54 / 819.70
Note: 2009-10 year incomplete
a This table uses Innovation Australia registration data and indicates the declared intention of registrants to claim under each element. Actual benefits will vary depending on individual circumstances.
* Total registrants for the R&D Tax Offset are (A+D+E+G).
** Total registrants for the 175% Premium are (B+D+F+G).
*** Total registrants for the International Premium are (C+E+F+G).
Table 2.1 illustrates the number of companies registered for different elements of the R&D Tax Concession and their reported R&D expenditures for 200809 and 2009-10.
The total number of companies registered as at 30 June 2011 for the 2009-10 income year was 8,614. Of these, a total of 3,161 companies (37 per cent) intended to claim only the R&D Tax Offset and 1,508 companies (18 per cent) intended to claim only the 175 per cent Premium, while 706 companies (eight per cent) intended to claim both the R&D Tax Offset and the 175 per cent Premium. In addition, a total of 54 companies indicated an intention to claim the International Premium.
Figures 2.4 and 2.5 present the number of registrations for 2009-10 by R&D expenditure and turnover respectively.
Figure 2.4 Number of registrations by R&D expenditure and element for 2009-10, as at 30June2011(incompleteyear)
Figure 2.4 data set
Figure 2.5 Number of registrations by turnover range and element for 2009-10, as at 30 June2011(incompleteyear)
Figure 2.5 data set
Companies reporting a turnover of less than $5 million perannum represented the largest single group of registrants (65 per cent) for the R&D Tax Concession in the2009-10 income year. The number of large companies with turnovers of more than $50 million perannum represented 12 per cent of registrants.
Table 2.2 New registrants as at 30 June 2011 a
New Registrants b, as at 30 June 2011 / 2008-09 Number of Companies / 2008-09 Reported R&D Expenditure ($m) / 2009-10 Number of Companies / 2009-10 Reported R&D Expenditure ($m) /Total new registrants / 1,866 / 1,406.75 / 1,606 / 921.43
125% R&D Tax Concession / 807 / 721.79 / 624 / 526.84
R&D Tax Offset (A) / 878 / 251.73 / 860 / 238.11
175% Premium (B) / 126 / 250.19 / 87 / 144.27
International Premium (C) / 24 / 170.8 / 2 / 0.29
Tax Offset and 175% Premium (D) / 26 / 9.39 / 32 / 11.89
Tax Offset and Internat. Premium (E) / 2 / 0.47 / 1 / 0.03
175% Premium and Internat. Premium (F) / 3 / 2.38 / 0 / 0
Tax Offset and Premium with Internat.Premium (G) / 0 / 0 / 0 / 0
Total Tax Offset * / 906 / 261.59 / 893 / 250.03
Total 175% Premium ** / 155 / 261.96 / 119 / 156.16
Total International Premium *** / 29 / 173.65 / 3 / 0.32
Note: 2009-10 year incomplete
a This table uses Innovation Australia registration data and indicates the declared intention of registrants to claim under each element. Actual benefits will vary depending on individual circumstances.
* Total registrants for the R&D Tax Offset are (A+D+E+G).
** Total registrants for the 175% Premium are (B+D+F+G).
*** Total registrants for the International Premium are (C+E+F+G).
b A ‘new registrant’ is a company registered for the R&D Tax Concession for the first time in a given income year. A ‘new registrant’ may be a member of a company group, other members of which may have registered for and claimed the R&D Tax Concession.
Take up of the R&D Tax Offset and 175 per cent Premium elements
The R&D Tax Offset and the 175 per cent Premium have been in operation since the2001-02income year.
For the most recent complete income year 2008-09, a total of3,537 companies indicated their intention to claim the R&D Tax Offset (including633 companies intending to claim both the R&D Tax Offset and the 175percentPremium). This represents 41 per cent of total registrants and approximately seven per cent of total R&D reported expenditure, which is comparable with the equivalent figures for the 2007-08 income year (42 per cent of registrants andeightper cent of R&D expenditure).
For the 175 per cent Premium, 1,651 companies indicated an intention to claim this element for the 2008-09 income year (including 633 companies intending to claim both the R&D Tax Offset and the 175 per cent Premium). This corresponds to 19 per cent of total registrants and 60per cent of total R&D expenditure, which represents no change on the equivalent figures for the previous income year (2007-08).
Registered Research Agencies
The Australian Government’s commitment to encouraging business R&D is complemented by facilitating access by small and medium sized companies to R&D expertise through the services provided by Registered Research Agencies (RRA).
RRA registration allows companies which would be unable to claim the tax concession for R&D if their R&D expenditure has not reached the minimum threshold ($20,000), to benefit from the concession by contracting their R&D work to an organisation with RRA status. This enables companies to access expertise in Australia’s public and private sector R&D organisations, reducing unnecessary duplication of R&D facilities and improving the overall effectiveness of Australia’s R&D effort.
As at 30 June 2011, 173 organisations were registered as RRAs.
Governance of the R&D Tax Concession Program
The R&D Tax Concession is administered by Innovation Australia (assisted by AusIndustry) and the Australian Taxation Office.
The Tax Concession Committee (TCC) administers the R&D Tax Concession under delegation from Innovation Australia.
The role of the TCC is outlined in Section 3 - Corporate Governance.
Liaison with the Australian Taxation Office
AusIndustry and the ATO continued to maintain a high level of formal and informal interaction throughout the year. Strategies to improve joint administration of the R&D Tax Concession and to safeguard its integrity continued to be developed through day-to-day contact between the two agencies and through formal liaison meetings.