Australia is finally being noticed as a strong market opportunity for US technology companies embarking on their global expansion. English speaking, a stable economy with a penchant for technology spending – Australia is a strong (and easy) customer in itself and a perfect test-bed for new product releases. Many US technology companies have caught on in the past year including Dropbox, Survey Monkey, Datastax and more. Most commonly US companies enter the Australia with sales, marketing and customer support staff to start servicing the local market.
What they may not know is that Australia also is a strong candidate for conducting R&D activity.
In many respects Australia has programs that are highly supportive of innovation undertaken in Australian borders. The Australian government encourages innovation with the Research & Development Tax Incentive, a program that has been around in many forms since the 1980’s. Not industry specific, the R&D Tax Incentive allows Australian companies to secure significant cash and non-cash benefits when undertaking eligible R&D activities in Australia.
At a high level – if experimental work is being undertaken with a view to generating new knowledge for which the outcome is unknown – then a company is generally seen to be engaging in eligible R&D.
The R&D Tax Incentive is a refundable tax offset program (for companies with associate turnover less than AUD$20m) – meaning that these additional tax losses can be ‘cashed out’. The program in its current format allows for a 45% refundable tax offset for eligible companies. The second is a non-refundable 40 per cent tax offset to eligible larger entities.
So for example, if a US technology or medical device company set ups an Australian entity, spends $100,000 on eligible R&D activities and is pre-revenue, the Australian Taxation Office will write them a check for $45,000. For ‘small’ companies i.e. those with company turnover (including associates) of less than $20m, this makes the Australian R&D scheme one of the best in the world.
Citrix Case Study
An example of a larger company taking advantage of the 40 per cent tax offset, is Citrix. The most recent changes to the R&D tax incentive have made it possible for multinational companies to claim the tax credit by changing the definition of R&D as well as the definition of sales activity. Read more on the Citrix case study here.
If you are a US company, don’t miss out on the talent Australia has to offer.
Australian universities now have 8 entries in the top 200 universities in the world. The pool of talent graduating from Australia is at a level never seen before. And local and global companies are partnering with Australian universities to develop innovative solutions for eventual commercialization. What’s more, with the cost of engineers and intense competition in Silicon Valley, companies are taking advantage of Australian engineering talent.