Asian Firms to Benefit From Australian City's New Tax Scheme

Asian companies now have extra incentive to invest in Melbourne following a new tax scheme that will benefit companies carrying out R&D activities through a permanent establishment in Victoria, Australia.


An agreement paving the way for Australia’s competitive new R&D tax credit system has confirmed expert forecasts that Melbourne will become the world’s most attractive location for R&D.


The new system, which came into effect 1 July 2011, applies to all companies that carry out R&D activities through a permanent establishment in Australia.


Subsidiaries of Asian-owned firms, small to medium enterprises (SMEs), start-ups, and incubator companies will be the big winners under the new tax rules. The $1.8 billion R&D tax credit will deliver more funding to innovative firms – including advanced manufacturers, ICT and biotech – providing a valuable incentive for investment in Australia.


Under the new broad-based system, companies with turnover of less than AUD$20 million will be eligible for a 45% refundable tax credit. The credit will also be refundable for companies with a tax loss, with the Australian Government providing an upfront cash refund of 45% for eligible R&D activities.

In anticipation of this legislation, KPMG last year produced a report showing that this new system would benefit almost every sector in the economy. The report also noted that building on Victoria’s existing strength in R&D, introduction of this globally competitive system would make Melbourne the world’s most attractive tax environment for R&D.


KPMG’s biennial study, Competitive Alternatives, found that companies benefitted from an 88% lesser tax burden for R&D activities carried out in Melbourne than in the United States.


Victoria already leads Australia for business expenditure on R&D by foreign investors, accounting for 30% of the national total in 2008-09.

The state is also the national leader for overall business investment in R&D in key sectors, including automotive (72%), basic chemicals (50%), advanced food processing (40%), and publishing (69%).


Melbourne offers investors a highly innovative operating environment with access to world-class research institutions, as strong pipeline of talented and motivated professionals, a stable and transparent regulatory environment, and an extremely high quality of life in one of the world’s most liveable cities.