R&D Tax Credit – what’s going on?

There has been much speculation recently regarding the introduction of the legislation for the proposed new R&D Tax Credit.

The exposure draft legislation and explanatory material was released for public comment a week prior to Christmas and the final submission’s were accepted last Friday 5th February.

If you would like to examine the draft legislation you can download it from the Treasury website here:


The new R&D Tax Credit has been widely condemned across the board by industry and business sectors. If the legislation is passed through parliament in it’s current form, many companies will be ineligible due to the new ‘dominant purpose’ test which restricts claimable supporting R&D activities, along with the new definition of R&D which now includes both novelty and high levels of technical risk as part of the criteria for eligibility.

High levels of technical risk according to the draft legislation is defined as:

“The threshold ‘high levels’ of technical risk is set down in terms of uncertainty that can only be removed through application of the scientific method based on scientific principles. This contrasts R&D from less rigorous ‘trial and error’ or ‘fitting’ that is part and parcel of simply making things work.”

The proposed legislation is geared towards limiting large scale R&D described as ‘Aggressive R&D Claimants’. Unfortunately, in the process, SME’s will be affected and as a result SME’s will limit expenditure invested in R&D. This will result in a reduction in applicants applying and effectively crippling innovation in Australia.

Let’s hope someone see’s sense in Canberra before it’s too late……watch this space.

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