Yesterday, the federal budget once again mentioned the proposal made last year to decrease the offset of the R&D Tax Incentive for businesses. It comes as no major surprise with the rejection of the R&D claim for big names such as Commonwealth Bank and tech companies like Airtasker making headlines as of late. The change will attempt to make it more difficult for larger companies over $20 million in aggregated turnover in making erroneous claims and establish a clear and strict set of guidelines that will try to make sure that all claimants meet eligibility criteria and claim the right amount of expenses to suit.
Whilst some may argue it is step in the right direction, the R&D Tax Incentive is still very important for the growth of the FinTech ecosystem, and it is a little worrying that we continue to see cuts to the scheme in a time of rapid change and increasing globalisation while Australia still lags behind major developing countries in terms of their technology.
That said, start-ups and small-to-medium sized businesses under $20 million aggregated turnover will still see a reasonable tax offset compared to larger companies over the $20 million threshold. If the bill passes, the changes will take effect for applications starting 1 July 2018:
- For companies <$20 million aggregated turnover, the R&D Refundable Tax offset rate will be equal to the claimant’s tax rate plus 13.5%. For most businesses this will be equal to 41%;
- For companies >$20 million aggregated turnover, the R&D Non-Refundable Tax offset rate will be equal to the claimant’s company tax rate plus:
- 4% for R&D expenditure between 0% to 2% R&D intensity;
- 6.5% for R&D expenditure above 2% to 5% R&D intensity;
- 9% for R&D expenditure above 5% to 10% R&D intensity; and
- 12.5% for R&D expenditure above 10% R&D intensity, where R&D intensity is measured as the proportion of R&D expenditure compared to the total expenditure for the financial year.
On another note, the deadline for the 2018 FY R&D Tax Incentive application is the 30th of April 2019. There’s only a few weeks left to apply!
If you have yet to submit your information for the 2018 FY, or have any questions related to the proposed changes for the 2019 FY, please contact us on our email at info@thegrantspecialists or on (02) 8861 9876.
