Changes to Research & Development Incentives
BUDGET UPDATE │ MAY 2018
The Government is reforming the Research and Development Tax Incentive (R&DTI) to reward additional investment in R&D while also ensuring the integrity and fiscal affordability of the R&DTI.
For companies with aggregated annual turnover of $20 million or more, the Government will introduce 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.
The changes will apply for income years starting on or after 1 July 2018.
The measures include:
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Improve the integrity of the R&DTI, helping ensure ineligible R&D claims are denied |
Implementation of a series of compliance, enforcement and administration changes to improve the integrity of the R&DTI. |
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Smaller companies will continue to benefit from a refundable R&D tax offset |
From 1 July 2018, the Government will: · Introduce a $4 million annual cap on cash refunds for R&D claimants with aggregated annual turnover less than $20 million. Amounts that are in excess of the cap will become a non-refundable tax offset and can be carried forward into future income years; · Exclude R&D tax offsets for clinical trials from the $4 million cap on cash refunds, recognising the critical role of R&D expenditure on clinical trials in developing life changing drugs and devices; and · Amend the refundable R&D tax offset so it is a premium of 13.5 percentage points above the claimant’s company tax rate for that year. |
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Refocus support for larger companies towards those undertaking additional, higher intensity R&D. |
From 1 July 2018, the Government will: · Introduce a new R&D premium for companies with aggregated annual turnover of $20 million or more, which provides higher rates of R&D support for higher R&D intensity. The R&D premium will provide multiple rates of non-refundable R&D tax offsets, increasing with the intensity of the claimant’s incremental R&D expenditure. |
The R&D expenditure threshold — the maximum amount of R&D expenditure eligible for concessional R&D tax offsets, will be increased from $100 million to $150 million per annum.
For companies with aggregated annual turnover below $20 million, the refundable R&D offset will be a premium of 13.5 percentage points above a claimant’s company tax rate.
Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum. R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years.
Refundable R&D tax offsets from R&D expenditure on clinical trials will not count towards the cap.
Speak with our Tax Accountants about any questions you may have regarding what impact the Budget measures will have on your personal circumstances.
Please contact us below or call us on 1300 627 829
Source: Tax Wise 2018
