Australia's pharma industry welcomes R&D tax credit, saying it will deliver real benefit to economy

The introduction of a new 40% R&D tax credit will help keep Australia at the forefront of medical research, said the drug industry trade group Medicines Australia chief executive Brendan Shaw, welcoming the Senate Economics Committee's recommendation that the new R&D tax credit be implemented before the end of June.

Under the new scheme, which was first mooted late last year, companies can claim a tax offset of at least 40% of their expenditure on R&D activities, rising to 45% for firms with a turnover of less than A$20 million ($17 million). For example, a company with an annual turnover of A$4 million that incurred A$1 million in R&D expenditure could previously have claimed a refund for A$375,000 under the R&D tax offset.

The new R&D tax incentive means the company will be able to receive a refund of $450,000 when it lodges its tax return for the income year. It will also allow small start-up firms to get an immediate contribution towards their R&D spend, even if they are not yet turning a profit.