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BDO Australia has issued a statement following the federal government’s move to reintroduce draft legislation amending the Research and Development Tax Incentive.
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BDO responds to proposed tax incentive changes
09 December 2019
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The Research and Development Tax Incentive is intended to retrospectively apply from 1 July 2019 with the proposed measures reintroduced set to amend the available tax offset rates.
For entities with aggregate turnover of less than $20 million, this will see the corporate corporate tax rate (currently 27.5 per cent) plus a 13.5 per cent incentive component, refundable up to a cap of $4 million (excluding clinical trial costs).
Meanwhile, for entities with aggregate turnover greater than $20 million, this will see the corporate tax rate, plus a tiered incentive component, applied incrementally.
“By way of example, a company with $1 million in R&D expenditure and $10 million of total expenditure will have an intensity rate of 10 per cent,” the government noted.
“It will be entitled to a 4.5 per cent incentive component on the first $400k of R&D expenditure, 8.5 per cent on the next $500k of R&D expenditure and 12.5 per cent on the last $100k of R&D expenditure. Accordingly, its net total benefit will be $73,000 or 7.3 per cent of R&D expenditure.”
Other changes noted by the government include: increasing the R&D expenditure threshold from $100 million to $150 million; adjusting the treatment of feedstock input expenditure and government recoupments through additional assessable income, to claw back the incentive component associated with these aspects of an R&D Tax Incentive claim; and increasing Innovation and Science Australia’s ability to make binding determinations about its application of the program.
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“It is disappointing to see the government has not followed the advice of the Senate committee in reconsidering the $4 million cap on the refundable component of the tax offset, and the intensity measures applied to non-refundable offsets,” BDO said in response to the proposed changes.
“By the government’s own estimates, this will result in $1.8 billion being returned to the budget, rather than invest in Australian business over the foreseeable forward estimates.”
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