With the increase in Australian companies claiming the R&D Tax Incentive over the last few years it is certainly no surprise that the government is looking at ways that it can support innovation without overly costing taxpayers. Therefore the 2018 Budget R&D changes place a strong focus on activities that will “better target the program and improve its integrity and fiscal affordability”.
The Budget’s key changes will impact income years commencing on or after 1 July 2018 and 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 Budget and its changes to the 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)