Research and Development (R&D) tax incentives reintroduced into Parliament
On December 5th, the Morrison Government reintroduced legislation in an effort to better target the Research and Development Tax Incentive (R&DTI) and to ensure its ongoing sustainability.
The following measures were introduced and will be further debated when parliament resumes in February 2020.
- R&D expenditure threshold increased to $150 million from $100 million
- R&D entities with an aggregated turnover of less than $20 million are generally entitled to an R&D tax offset rate equal to their corporate tax rate plus a 13.5 per cent premium.
- The amount of a refund that an R&D entity can receive is capped at $4 million per annum.
- Offset amounts that relate to expenditure on clinical trials do not count towards the cap and remain refundable.
- R&D entities with an aggregated turnover of $20 million or more are entitled to an R&D tax offset equal to their corporate tax rate plus a premium based on the level of their incremental R&D intensity for their R&D expenditure.
There have also been some key changes to the start date as well as the intensity bands for the non-refundable offsets.
For a comprehensive overview of the amendment, read Deloitte’s analysis here.
These reforms respond to the 2016 Review into the incentive’s effectiveness, which was chaired by the former Treasury Secretary, John Fraser, the then Chair of Innovation Australia, Bill Ferris, and Australia’s Chief Scientist, Alan Finkel. The Review found that the incentive did not adequately target support towards additional R&D that would not have otherwise been undertaken.
Since 2013, the R&DTI has provided $13.8 billion in support to businesses. The R&DTI remains an important part of the Government’s support for innovation. It is crucial that funding provided is fiscally sustainable and encourages businesses to back themselves to be a key driver of new ideas, products, services and jobs.
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