Buried on budget night a week ago was not only those travel expenses (missed by the media for days), but a move to simplify and enhance the Research and Development (R&D) Tax Concession so that it provides better incentives for business.
The Federal Government says the new R&D Tax Credit is the biggest reform to business innovation support for more than a decade.
On face value it is, being far more generous than what the previous Government was prepared to offer.
The Rudd Government claims the change will boost investment, support jobs and strengthen Australian companies so they can take full advantage of new opportunities as the economy recovers.
Industry Minister, Senator Kim Carr was in the UK at the weekend selling Australia and got a splash in the Financial Times with the news of the revamped grant.
"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 on Sunday.
"The scheme, to be managed through the Australian tax-return system, would have no turnover limit."
Last week’s federal budget included $3.1 billion in new money for research and innovation, with total funding to reach almost $8.6 billion in the financial year beginning in July.
In the buried statement from last Tuesday night the Government said that from 2010-11 it will replace the complex and outdated R&D Tax Concession with a simplified R&D Tax Credit "which cuts red tape and provides a better incentive for business to invest in research and innovation."
It said the new R&D Tax Credit "will better reflect the financial realities facing many businesses during the global recession.
It will help ensure that Australian businesses are well placed to take full advantage of generous incentives to innovate during the global recovery.
"The new Tax Credit provides a 45 per cent refundable credit for firms with an annual turnover of less than $20 million – equivalent to a Tax Concession of 150 per cent.
"This means that firms will receive a tax refund of 45 per cent of their R&D spending when they file their tax return.
"This measure effectively doubles the standard level of support for innovative small and medium sized companies.
"The measure reverses the previous government’s retrograde decision to halve the R&D Tax Concession when it came to office.
"Importantly, the refundable credit will be available to small companies in tax loss, with no limit on the level of R&D expenditure they undertake.
"This will provide a real boost to start-up companies in areas such as biotechnology and ICT.
"Around 5,500 small firms stand to benefit under these new arrangements.
"Businesses with a turnover of more than $20 million will also benefit from the new scheme, with access to a 40 per cent non-refundable credit – equivalent to a tax concession of 133 per cent.
"Companies undertaking R&D in Australia where the intellectual property is held offshore will also be able to access the 40 per cent non-refundable credit.
"As a transitional measure for 2009-10, the R&D expenditure cap for the existing R&D Tax Offset will be lifted from $1 million to $2 million. The cap is the maximum amount a firm can spend on R&D to be eligible for the Tax Offset.
"This change addresses the perverse incentive for firms to limit their R&D spending under the current threshold, and will provide a further boost to small companies in research intensive industries of the future.
"Under the new Tax Credit system, eligibility criteria will be tightened to make sure that our investment is getting the best results – supporting only genuine R&D. This will provide offsetting savings to fund improvements to the system."
The Government said it would consult further on the eligibility criteria in developing legislation for the new Tax Credit and a consultation paper will be released in the next few months.
The Government said the reform of the R&D Tax Concession will complement the Government’s new $196.1 million to establish a Commonwealth Commercialisation Institute and "reaffirms its commitment to supporting innovation in Australia."
What it does open up is the possible revitalisation of the technology sector on the ASX in coming years: that will include computer and information technology, biotechs and pharmaceuticals, plus related equipment suppliers and green technology, which could very well be the biggest growth area.
The huge solar power station idea floated yesterday by the Prime Minister at the weekend could benefit from this new grant system, as could some of the work and many of the applications for the National Broadband Network, if the grants system is not changed by a new government in
