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Bio Technology : October 2009
58 Australasian BioTechnology Volume 19 • Number 3 • October 2009 AusBioBUSINESS Cash fow opportunities on the rise By Karen Stein, Partner at Deloitte in the R&D Taxes & Incentives Team, and Jacqueline Hill, R&D Taxes & Incentives Manager. For some life sciences companies, claiming the R&D tax offset has been part of ‘business as usual’. However with signifcant reform announced in the 2009 Federal budget, new opportunities have emerged to maximise the cash fow position of loss making or start up companies. Increased access to the R&D tax offset For financial years commencing on or after 1 July 2009, the R&D expenditure threshold of the R&D Tax Offset has increased from $1 million to $2 million. This provides many more companies with the opportunity to access the cash offset. Large numbers of companies who were until this date, only capable of utilising the R&D tax concession to increase their carry forward losses, are now potentially able to receive a 37.5% cash rebate on their R&D expenditure. This provides a further opportunity to reinvest the cash in the R&D activities being undertaken, or alternatively assist with commercialising the R&D. A double opportunity for all offset claimants! Due to the increase in the threshold, claimants are now able to access larger refunds and more companies are now eligible to claim the R&D tax offset. Further where the tax offset is reinvested in the following financial year, with the introduction of a new tax credit system in years commencing on or after 1 July 2010, companies may potentially be eligible to receive a 45% tax credit on the reinvested expenditure. In just two years a company may therefore receive up to 54% of the initial outlay back from the government. With subsequent reinvestment, the benefits just keep rising. How does this work? The R&D Tax Concession currently provides companies with the ability to deduct their R&D expenditure at the rate of 125%, or in some cases 175%. By generating after tax savings, this can assist with funding additional clinical development.