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Changes in R & D tax incentive - What it means for you

Changes in R & D tax incentive - What it means for you

Posted 23 Sep 16 by Malav Oza

On 16th September 2016 the Budget Savings (Omnibus) Bill 2016 received Royal Assent. The bill contains taxation and other pronouncements which also includes a change to Research and Development (R & D) Tax Incentive rates.

The bill reduces the R & D Tax Incentive rates by 1.5% from 1 July 2016 and introduces a ceiling of $100m in relation to the incremental tax offset. The eligible R & D expenditure in excess of $100m will qualify for a tax offset at the company tax rate.

The reduction follows a change in company tax rate to 28.5% for Small Business Entities (SBE) with turnover of $2m which came into effect from 1 July 2015.

The following table highlights that other than the 2016 financial year where the benefit from the R & D Tax Incentive increased in percentage terms for SBE. This change maintains the benefit that was in place for the 2015 financial year.

The entities with turnover >$2m (subject to the proposed changes to definition of SBE per the 2016-17 budget) a reduction is explained in the following table:

R & D Tax Incentives remain an attractive incentive in line with the Turnbull Government’s agenda to promote Innovation in the economy. Australian R & D Tax Incentive continues to be a well directed and one of the most generous incentives among the Developed economies.

A review of the R&D Tax Incentive program announced in December 2015 as part of the National Innovation and Science Agenda is being conducted by Mr Bill Ferris AC, Chair, Innovation and Science Australia, Dr Alan Finkel AO FTSE, Chief Scientist of Australia, and Mr John Fraser, Secretary to the Treasury.

The team at PKF have the necessary expertise to review your eligibility and assist you with the lodgement of your next R & D Tax Incentive claim. 

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