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Bio Technology : July 2009
AusBioFEATURE Budget 09 delivers for biotech – tax details As the Federal Budget ‘dust’ settles, and the details of the proposed measures begin to emerge, the implications for the biotech sector are becoming clearer and questions abound. The refundable tax credit has, without doubt, caused the most excitement – but there were a raft of announcements affecting the sector. This Budget 09 wrap up, seeks to delve a little deeper into the detail of the tax credit proposal and touch on other measures relevant to the sector. The $1.4b R&D Tax Credit “is a broad-based, marketdriven package to replace the R&D Tax Concession…” says AusIndustry. The package includes: • A 45 per cent refundable tax credit (the equivalent to a 150 per cent concession) will be provided to small firms with a turnover of less than $20m per annum; • A 40 per cent tax credit cent (the equivalent of a 133 per cent deduction) will be provided to foreign-owned firms, and firms with a turnover of more than $20m per annum; • The credit is decoupled from the corporate tax rate and thereby creates certainty in the level of assistance; and • The increased benefits to companies are balanced by removal of the complex R&D Tax Concession Premium and tightening definitions to support genuine R&D. Serg Duchini, National Leader R&D Taxes & Incentives and Partner at Deloitte, has been involved in the R&D Tax Concession Administration Consultative Committee. He says the tax credits will significantly ease the burden of capital for local companies and allow them to focus on what they do best – research and development. He provides the following information: To illustrate the operation of the 45% refundable R&D tax credit, the accompanying figure shows how the credit can be claimed for both a tax paying and tax loss company: 45% refundable R&D Tax Credit Eligible Expenditure Deduction Impact on Taxable Income Impact on Tax Liability Tax Credit @ 45% Less: tax deduction forgone (at current 30% tax rate) Equals: net tax credit benefit Additional value of assistance 12 Australasian BioTechnology Volume 19 • Number 2 • July 2009 Tax Profit $1,000,000 0.00 0.00 ($450,000) $450,000 ($300,000) $150,000 15% of R&D $450,000 ($0 – $300,000) $150,000 – $450,000 15% – 45% of R&D 0.00 0.00 Tax Loss