R&D Tax Credit
In May 2010, the Australian Government introduced a bill in Parliament to replace the existing R&D Tax Concession system with the new R&D Tax Credit system. This followed a 12 month consultation process, during which Medicines Australia worked closely with various Government departments to ensure that the new system delivers tangible benefits for our member companies. However, despite being passed twice by the House of Representatives, the bill failed to pass the Senate in time to allow the new tax incentive to commence on 1 July 2010. Then on 15 June 2011, the Government announced that it had secured enough cross-party support in the Senate to finally pass the bill into law. The start date for the new tax incentive will be 1 July 2011.
Medicines Australia has, from the start, strongly supported the R&D Tax Credit system’s implementation. It will replace a program which failed to help Australian companies attract a larger share of the global bio-pharmaceutical industry’s R&D investment budget, which is worth more than $70 billion annually. The R&D Tax Concession program was outdated, unpredictable and overly complicated, and it did not provide a globally competitive incentive to companies for conducting R&D in Australia.
The implementation of the new R&D Tax Credit system will make access to tax benefits more predictable, and it will help reduce the cost of conducting eligible R&D in Australia by up to 10%. Together, these factors will enable our members to better demonstrate to global headquarters the advantages of sending R&D investment to Australia.
An October 2010 report by KPMG Global placed Australia at the top of its ranking of the most competitive locations for R&D investment, ahead of Canada, the United Kingdom, the Netherlands, Mexico, the United States, France, Japan, Germany and Italy. According to KPMG, the improvement in Australia’s ranking is the “result of its adoption of the ne R&D Tax Credit system”. A separate report by a Canadian accounting firm, Scitax Advisory Partners, also confirmed that the new Australian system will deliver a far simpler (and more competitive) tax incentive to companies conducting R&D in Australia, compared to Austria, Canada, China, France, Germany, India, Ireland, Mexico, the Netherlands, New Zealand, South Africa, Spain, the United Kingdom and the United States.
Over the next 12 months, Medicines Australia will work with AusIndustry and other Government departments to develop sector-specific guidelines. We also plan to organise detailed briefings to ensure our members understand how to access the new tax incentive.
To view Medicines Australia’s submissions on the design and implementation of the new R&D Tax Credit system, please visit the submissions page on our website.
Page updated: August 2011