Changes to the R&D tax incentive rates were announced in the 8th May 2018 budget including:
Summary R&D tax rate changes 2018
-Cap of $4m for cash rebates (except clinical trials) for under $20m aggregated turnover companies
– Lock the rebate to 13.5% above claimant tax rate for under $20m t/o
-New Intensity Scheme for $20m+ turnover -set against % total expenditure
-Keeping the $20k asset write off for small business
-Implementing stronger compliance
-Publishing claimants details
-Increase the max expenditure from $100m to $150m
R&D tax incentive rate changes 2018 in detail
The detail as published in the May 2018 budget paper no. 2.:
The Government will amend the research and development (R&D) tax incentive to better target the program and improve its integrity and fiscal affordability in response to the recommendations of the 2016 Review of the R&D Tax Incentive. The changes will apply for income years starting on or after 1 July 2018.
For companies with aggregated annual turnover of $20million or more, the Government will introduce an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of R&D expenditure as a proportion of total expenditure for the year. The marginal R&D premium will be the claimant’s company tax rate plus:
- 4 percentage points for R&D expenditure between 0 per cent to 2 per cent R&D intensity
- 6.5 percentage points for R&D expenditure above 2 per cent to 5 per cent R&D intensity;
- 9 percentage points for R&D expenditure above 5 per cent to 10 per cent R&D intensity; and
- 12.5 percentage points for R&D expenditure above 10 per cent R&D intensity.
The R&D expenditure threshold — the maximum amount of R&D expenditure eligible for concessional R&D tax offsets, will be increased from $100 million to $150 million per annum.
For companies with aggregated annual turnover below $20 million, the refundable R&D offset will be a premium of 13.5 percentage points above a claimant’s company tax rate. Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum. R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years.
Refundable R&D tax offsets from R&D expenditure on clinical trials will not count towards the cap.
The Government will further improve the integrity of the R&D program by implementing stronger compliance and administrative improvements. These improvements include increased resourcing for the Australian Taxation Office and Department of Industry, Innovation and Science, which will be used to undertake greater enforcement activity and provide improved program guidance to participants. Other changes include improving the transparency of the program by enabling the ATO to publicly disclose claimant details and the R&D expenditure they have claimed, limits on time extensions to complete R&D registrations and amendments to technical provisions (such as the feedstock and clawback rules and the general anti-avoidance rules).
R&D tax May Budget 2018 rate changes to take effect after 1st July 2018.
Need to review your R&D tax claim or start a new one?
Give us a call and we can provide you with a free consultation and estimate of your rebate. phone: 03 9008 5937 or email us.