Proposed Legislative Changes to the Research and Development Tax Incentive Scheme
In the 2018 May Budget, the Australian Federal Government introduced proposed changes to the Research and Development Tax Incentive (“RDTI”) Scheme which will (if turned into legislation) impact RDTI claims from the 2018/19 financial year onwards. The proposed changes are in response to findings from a 2016 review into the RDTI that found that:
- The cost of the program had grown exponentially over a relatively short period of time; and
- The objectives of the program were not being met.
What the changes to the Research and Development Tax Incentive Scheme include
The proposed changes hope to address these issues by improving the integrity of the RDTI through more stringent anti-avoidance measures, introducing a $4 million annual cap on cash refunds for R&D claimants with an aggregated turnover of less than $20 million (clinical trials excluded) and refocusing support for larger companies towards higher intensity R&D activities.
The proposed changes would also adjust the refundable Research & Development tax offset so it is a premium of 13.5 percentage points above the claimant’s company tax rate for that year, meaning that the benefit would be reduced from 43.5% to 41% of R&D expenditure for a company on a tax rate of 27.5%.
Research & Development Premium for larger companies
For companies with an aggregated annual turnover of $20 million or more, the proposed legislation will introduce a “Research & Development Premium” which will provide higher rates of R&D support for higher R&D Intensity (the proportion of R&D expenditure over total annual expenditure). 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.
Overall, the proposed changes to the Research and Development Tax Incentive Scheme are quite complex and will introduce an extra layer of complexity to a program that should be encouraging companies to engage in R&D activities in Australia. Companies that have claimed the RDTI in the past and/or had planned to make a claim in the future, will need to speak with their advisors to determine how the proposed changes will affect them going forward.
Speak to us today about how the proposed changes to the RDTI will affect your business. Greenwich & Co are experienced in preparing successful R&D Tax Incentive claims. We work with companies to develop strategies to maximise R&D Tax returns and can assist you with each step of the compliance process.
Learn more about Greenwich & Co’s expertise in R&D Tax.