175% International Premium

Introduction

Removal of the R&D tax concession When considering how the R&D provisions apply to your circumstances, remember that for income years starting on or after 1 July 2011 you no longer use the R&D tax concession. You need to consider the new R&D tax incentive. The concession and the new incentive apply differently. For further information, including fact sheets and a calculator, refer to Research and development tax incentive - home.

We jointly administer the research and development (R&D) tax concession with AusIndustry.

The R&D tax concession is an Australian Government initiative to increase the amount of R&D being conducted in Australia by allowing companies to claim a tax deduction in their income tax return of up to 125% (and in some cases up to 175%) for their eligible expenditure on R&D activities.

For years of income that start after 30 June 2007, the incremental tax concession (175% premium) has been extended to companies that incur expenditure on behalf of a grouped foreign company that is greater than their average expenditure over the previous three years. As a result, the 175% premium has been divided into two separate deductions:

• the extra deduction for increase in expenditure on Australian owned R&D (175% Australian Premium)
• the extra deduction for increase in expenditure on foreign owned R&D (175% International Premium).

The extension of the 175% premium is designed to encourage multinational subsidiaries that choose to hold their resulting intellectual property offshore to spend more on R&D in Australia. This means they can claim an:

• immediate 100% tax deduction for their expenditure on eligible R&D activities
• additional 75% immediate tax deduction for that portion of their expenditure that exceeds the average of their previous three years of R&D expenditure.