Research & Development Incentive – Update
The Australian government is amending the research and development (R&D) tax incentive program in relation to the recommendations of the 2016 Review of the R&D Tax Incentive.
These changes will come into effect for income years starting on or after 1 July 2018.
For those Australian companies undertaking research and development activities and with an aggregated turnover of $20 million or more the government will introduce an R&D premium that links the rates of the non-refundable R&D tax offset to the increased intensity of R&D expenditure as a proportion of total expenditure for the year.
The marginal R&D premium will be the R&D entity (claimant’s) applicable company tax rate plus:
- 4 percentage points for R&D expenditure between 0%-2% R&D intensity;
- 5 percentage points for R&D expenditure above 2%-5% R&D intensity;
- 9 percentage points for R&D expenditure above 5%-10% R&D intensity;
- 5 percentage point for R&D expenditure above 10% R&D intensity.
The maximum of R&D expenditure eligible for concessional R&D tax offsets will be increased from $100 million to $150 million per annum.
For those Australian companies with aggregated annual turnover below $20 million, the premium tax offset will be 13.5% percentage points above the R&D entity (claimant’s) company tax rate. Cash refunds from refundable tax offsets will also be capped at $4 million per annum.
Those R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offset to be utilised in future income years.
The Australian Government will endeavour to improve the integrity of the R&D program by implementing increasingly stronger compliance and administrative improvements. The improvements will include increased resourcing for both the ATO and Aus Industry. Also, other changes include improving transparency of the program by allowing the ATO to detail and publicly disclose claimant details and their R&D expenditure claimed.
If these changes above could impact you and your business or if you feel like you require any assistance with your research and development activities please don’t hesitate to contact our office on 07 5504 5700 to speak with our R&D experts.