NEW tax breaks on research and development spending are starting to benefit local companies, with some getting $22 million direct cash payments from the government.
The government changed the eligibility rules for R&D tax concessions in 2011, with the changes affecting the 2011-12 financial year.
What the changes have meant for businesses are now becoming clear, as they begin to lodge tax claims and receive cheques from the government.
Rare Earths company Arafura Resources has been paid $22.5 million for money it spent on R&D during the past financial year, while vanadium producer Atlantic expects to receive $22 million.
Waste management technology developer AnaeCo, which has spent $58 million developing its DiCom technology over 12 years, is hoping to get $4.9 million back for the 2011-12 financial year.
Ernst & Young partner Robin Parsons said the changes meant the number of smaller businesses able to access the incentives had grown, as the turnover threshold qualifying a business as ‘small’ was lifted from $5 million to $20 million.
But companies were also benefitting immediately, rather than having their incentives effectively stored as a rebate on future earnings.
“(Previously) the tax losses would get carried forward and, in what could possibly be many years to come, I would get to use those tax losses and in effect cash them out then,” Mr Parsons said.
The result was having significant benefits for local businesses - particularly resources companies attempting to develop costly projects.
“For companies like Arafura, that are working in perhaps more exotic minerals, it gives them the ability to see them through, whereas previously they would have struggled,” Mr Parsons said.
The $22 million Arafura has received drastically lessened the pressure for it to raise money to complete a feasibility study for the Nolans project in the Northern Territory (see Arafura pushes for rare earth at Nolans).
The amount returned to companies has also increased; from 37.5 cents in the dollar to 45 cents. But the changes also allow companies to get a payout regardless of how much money was spent on R&D (it was previously capped at expenditure of $2 million).
Mr Parsons said Arafura was one of the first companies to receive a payout but there would be many more in the coming six to 12 months as more tax returns were lodged and processed.
