Treasury has released a consultation paper and draft legislation to implement the amendments to the research & development tax incentive announced in the 2018-19 Federal Budget.
Applying to income years starting on or after 1 July 2018, the way the research and development (R&D) tax incentive applies will change to focus on ‘more intensive’ R&D activities, particularly in medical and clinical development. The changes attempt to refocus the incentive on activities that go well beyond what companies would normally do to improve.
Companies under $20m
For companies with an aggregated annual turnover less than $20 million:
- An annual $4 million cap will be introduced on cash refunds for R&D claimants. Amounts that are in excess of the cap will become a non-refundable tax offset and can be carried forward into future income years;
- Clinical trials will be excluded from the $4 million cap on cash refunds, to encourage development in this area; and
- The refundable R&D tax offset will be amended and will become a premium of 13.5 percentage points above the company’s tax rate for that year.
Companies over $20m
For companies with aggregated annual turnover of $20 million or more, an R&D premium will be introduced 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 marginal R&D premium will be the company’s tax rate plus:
- 4 percentage points for R&D expenditure between 0% to 2% R&D intensity;
- 6.5 percentage points for R&D expenditure above 2% to 5% R&D intensity;
- 9 percentage points for R&D expenditure above 5% to 10% R&D intensity; and
- 12.5 percentage points for R&D expenditure above 10% R&D intensity.
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.
To find out more about the R&D shake-up draft legislation, come and speak to us Tax Ideas Accountants & Advisers…http://taxideas.com.au/booking/ Tel: (02) 8318 1545