Last week the Treasury Laws Amendment (Research & Development Tax Incentive) Bill 2019 was introduced into the House of Representatives. This reflects recommendations of a Senate Committee review of the previous Treasury Laws Amendment Bill lapsed earlier this year.
The amendments include:
The research & development (R&D) tax offset for refundable R&D tax incentive claims is now provided as the claimant’s corporate tax rate plus a 13.5% premium. This reduces the effective offset for companies with a 27.5% tax rate from 43.5% to 41%.
The refundable R&D tax incentive now includes a cap of the refundable amount of $4 million per annum. However, offset amounts that relate to expenditure on clinical trials do not count towards this cap.
The R&D expenditure threshold has been increased from $100 million to $150 million.
The non-refundable R&D tax offset will now be tied to R&D intensity, as a ratio between R&D expenditure and total company expenditure. The proposed changes include three intensity tiers as opposed to the previously suggested four tiers.
Who is affected?
Small businesses, will have their R&D offset reduced.
Large entities with $20 million or more aggregated turnover who invest only a small portion of their overall business expenditure into R&D, as the amendments result in a significant reduction in benefit.
Large entities with $20 million or more aggregated turnover with a large portion of R&D expenditure, as the changes reward the heavy investment into R&D with a higher benefit.
How can we help?
The amendments generally apply to income years commencing on or after 1 July 2019, if enacted.
ShineWing Australia can assist in providing further information in relation to the proposed changes and guidance on how you may be affected.
Our experts can assist with further information.