Research and Development Tax Incentive in Australia

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Introduction:...............................................................................................................................2
Overview of the regularity:........................................................................................................3
ITAA 1997:................................................................................................................................4
Research and development tax Incentive:..................................................................................6
Effectiveness of the tax incentive:.............................................................................................7
Tax reformation:.........................................................................................................................9
Future Implications:...................................................................................................................9
Conclusion:..............................................................................................................................10
Reference List:.........................................................................................................................12

2TAXATION LAW
Introduction:
There are numerous nations that provides the substantial subsidies for the innovations
associated to the research and development. In the year 1985-86 research and development
tax incentive was introduced by Australia that offers the business with the amenities of
subtracting the expenses by approximately 150% 1. The implementation of tax concession in
the research and development was introduced in the year 1985 when the Australian business
industry was making their shift towards more integration and international economy.
The tax concession in the research and development was introduced by the
government for re-orienteering the Australian companies as well as altering the management
attitudes towards the research and development 2. In order to expand the small business
sector, the government of Australia has introduced the entree research and development as
the mechanism of support that provides the business with softs of moving in the direction of
research and development which have significantly led during the last decade at the
government expense. The tax concessions that is provided is termed as generous in respect of
the Australian standards. Notwithstanding of the rate of discount that is provided in the
concession, Australia offers that small business with the third most generous treatment of tax
of research and development among the other OECD countries.
1 Dechezleprêtre, A., Einiö, E., Martin, R., Nguyen, K.T. and Van Reenen, J.,. Do tax
incentives for research increase firm innovation? An RD design for R&D (No. w22405).
National Bureau of Economic Research 2016.
2 Ernst, C., Richter, K. and Riedel, N. Corporate taxation and the quality of research and
development. International Tax and Public Finance, 21(4), pp.694-719 2014.

3TAXATION LAW
Overview of the regularity:
The tax incentive that is provided to the small business for research and development
helps in promoting the engagement of the research and development activities that ultimately
benefits the Australian economy and also provides encouragement through tax incentives to
the small business3. The program of research and development was very launched as the
temporary measures that was due to be concluded on 30 June 1991. However, the Australian
government in the March month made an announcement that the research and development
activities would for a permanent measurement that would have the feature of one single
subject with numerous changes over the period of time.
The basic feature that govern the activities of the research and development is the tax
incentive that is provided to the small business so that the small business is encouraged to
undertake the activities of the research and development in Australia4. The concept of
research and development is held as the wider subject that has changed over the years. The
government implemented the tax concession of 150 per cent with the objective of promoting
the Australian companies engaged in the activities of research and development. The
objective of the company is to make the companies more internationally competitive and
innovations oriented. The primary purpose of providing tax concession was to improve the
situation of commercialization relating to the innovative process and techniques with the help
of which the products are developed in Australia.
3 Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., Corporate governance,
incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), pp.1-17 2015.
4 Castellacci, F. and Lie, C.M., Do the effects of R&D tax credits vary across industries? A
meta-regression analysis. Research Policy, 44(4), pp.819-832 2015.