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Bio Technology : July 2009
AusBioFEATURE Gains seen for biotech start-ups The 45% credit can be taken to directly reduce tax payable. In this case the bottom line additional benefit is 15% of the eligible expenditure. This is double the current benefit of 7.5% under the existing 125% R&D tax concession. Of further benefit, the tax credit will also be refundable in the event that the company is not tax paying. The quantum of refundable credit will be up to 45% of eligible expenditure. The credit can be thought of as an additional source of company funding, to the extent that the company moves into a tax paying position over time the benefit will be eroded because of future tax payable. At a minimum, the additional value of the benefit is still 15%. At a recent meeting of the R&D Tax Concession Administration Consultative Committee, the following key details emerged: • ATO and Treasury have confirmed that the nonrefundable R&D credits will be able to be carried forward. • The ATO confirmed it will consider it the impact on foreign tax credits (FTC) and the ordering of usage. It is likely the ordering will be to apply the FTC first and then R&D tax credit second, as FTCs are typically a case of ‘use it or lose it’. • In relation to the impact on a franking account, the ATO and Treasury say current thinking is that the tax credit will not give rise to a debit to the franking account. If confirmed this is good news, as it will provide companies with a real permanent difference for the first time. It is also positive for companies that have a focus and commitment to pay fully franked dividends. • The introduction of the R&D tax credit will see the new provisions being written into the 1997 Act. 73B and all associated sections will remain in the old 1936 Act. The new R&D provisions will be completely rewritten in “plain English” and be self contained in the 1997 Act. The link to past case law and precedent will be re-evaluated. • In mid-July 2009 a discussion paper will be issued on the new legislation including the proposed definitional changes. Submissions will be called for and need to be submitted by mid-August. • Draft legislation is expected mid-October 2009. Submissions on the draft legislation due by the end of November. • The new Bill is due February 2010 for the operative date of 1 July 2010. • Treasury modelling indicates that the number of R&D claimants is expected to increase by approx 8500 per annum, to over 14000 in the first year. Serg and his Deloitte colleagues will be expert speakers at AusBiotech member briefings, exclusive to member CEOs, MDs and CFOs (details below) and will be very active in the tax credit consultation process, working to ensure that members’ views are adequately represented. Ausbiotech Member Briefings Melbourne, Thursday 16 July 4.00 – 6.00pm at AusBiotech. Presented by Serg Duchini, National Leader R&D Taxes & Incentives, Deloitte. Brisbane, Tuesday 14 July 4.00 – 6.00pm at Deloitte. Presented by Jason Dunnachie, R&D Partner, Deloitte. Sydney, Thursday 6 August 7.30 – 9.00am at Deloitte. Presented by Karen Stein, R&D Partner, Deloitte. For more information contact: email@example.com The Budget also contained other measures relevant to biotechnology: Commonwealth Commercialisation Institute $196.1m to 2013 is designed to support innovative firms take their ideas to market, leverage private sector capital, and assist commercialisation of public sector research via the Commonwealth Commercialisation Institute. Volume 19 • Number 2 • July 2009 Australasian BioTechnology 13