On 5 December 2019 the Morrison Government introduced a bill that seeks to implement its proposed changes to the R&D Tax Incentive that were outlined in the 2018 Budget.
The key changes outlined in the bill are set to retrospectively apply from 1 July 2019 and will include the following:
- For companies with an aggregated turnover of $20M or more:
- Introducing an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of R&D expenditure as a proportion of total expenditure for the year. This premium will range from 4 percentage points to 12.5 percentage points, depending on the company’s R&D intensity.
- The R&D cap will be increased from $100M to $150M per annum.
- For companies with an aggregated turnover of less than $20M, the refundable tax offset will slightly decrease (from 43.5% to 41%) and the cash payouts will now be capped at $4M per annum (an exception exists for clinical trials, which will not be subject to this cap).
These changes are obviously intended to reduce the overall costs associated with the R&D Tax Incentive. Whilst there may be some large businesses that experience an increase in the net benefit from claiming the Incentive, the majority of large businesses are likely to experience a reduced tax saving. Smaller businesses will see a slightly reduced cash payout (2.5% lower than current payouts), but the majority should not be impacted by the imposition of the $4M annual cap.
If you’re looking to have a chat about how the proposed R&D Tax Incentive might impact your business in a more specific way, feel free to get in touch with us to arrange a tailored discussion.
dave@catalystsolutions.com.au– Dave Corbin (Managing Director, Catalyst Solutions Australia)
ben@catalystsolutions.com.au– Ben Kluwgant (Government Incentives Advisor, Catalyst Solutions Australia)
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