The R&D Tax Incentive is the government’s primary programme to encourage business R&D, and registrations for R&D activity conducted during the YE 30 June 2018 are open until April.

About the R&D Tax Incentive

To be eligible for R&D Tax Incentives your business must:

  • Incur eligible R&D Expenditure through a company structure;
  • Conduct experimental activity where the outcome cannot be determined in advance;
  • Generate new knowledge by developing new or improved:
    • Products;
    • Processes; or
    • Services;

Companies engaged in R&D may be eligible for the following tax benefit:

  • Where group turnover is less than $20 million, a 43.5% refundable tax offset provides the following for eligible expenditure depending on a company’s tax position:
    • a 43.5% cash refund to the extent a company is in tax loss;
    • a 16% tax saving/refund if a company is in a tax payable position;
  • Where group turnover exceeds $20 million, a 38.5% non-refundable tax offset  provides a 8.5% tax saving for eligible expenditure:

Important Compliance Information for Companies Already Claiming the R&D Tax Incentive

Companies already registering their R&D Activity should be aware of current compliance focuses by programme administrators.

AusIndustry and the ATO regularly release new guidance material outlining compliance requirements which should be reviewed during claim collation. Current areas of focus include:

  • Research before R&D Activity commences to show knowledge generated did not exist;
  • Substantiation of the process and results of experiments conducted during the R&D Activity;
  • Substantiation of the time claimed for personnel conducting the R&D Activity;

Proposed Changes to R&D Tax Incentive Announced in May 2018 Federal Budget

Changes were announced to the R&D Tax Incentive in the May 2018 federal budget which included:

  • Changes to R&DTax Offset rates:
    • Where group turnover is less than $20 million, the refundable R&D Offset is proposed to be based on a company’s tax rate + 13.5%;
    • Where group turnover exceeds $20 million , the non-refundable R&D Offset is proposed to be based on a progressive rate determined by the company’s R&D ‘intensity’;
  • Changes to caps on R&D Tax Offsets for very large claims;
  • Changes to other administrative provisions of the programme;

Whilst the changes were scheduled to apply for the YE 30 June 2019, legislation to enact the changes is yet to be introduced to parliament.

Recent events, including the consultation process on the R&D amendments explanatory memorandum and the scrapping of proposed company tax cuts may impact when, and to what degree the proposed changes are applied.

If you would like to review the eligibility requirements further or discuss your existing claims, please contact our office. More information is also available here:

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