The proposed changes to the Research and Development Tax Incentive (RDTI) were tabled in Parliament on 5 December 2019. Debate on the Bill was adjourned and won’t resume until at least February next year. The Bill is largely unchanged from its previous incarnation.
Key points as follows:
Start date of 1 July 2019 – 5 plus months have already passed and it will be more before the Bill is enacted. R&D work done between July and now will attract the proposed lower rates of benefit.
Small company groups with less than $20 million turnover will receive the company tax rate plus 13.5% as a refundable tax offset. Currently, these companies receive the tax rate plus 16%.
Refundable offsets will be capped at $4 million. Amounts over $4 million can be carried forward and used to offset future income tax payments. Clinical trial activities will be excluded from this cap.
Non-refundable “premium” rates have been simplified to 3 categories. As the rates apply on a sliding scale, companies will need to spend 13% of their total expenses on R&D to achieve the current 8.5%. The headline rate of 12.5% cannot be achieved, even with 100% spend on R&D. This applies to company groups with turnover greater than $20 million.
Remove inconsistencies and inappropriate outcomes where grants, disposal of assets or sale of R&D outputs. These integrity measures have been combined to a single consistent method of adjustment.
Publishing the R&D expenditure for every company claiming the incentive.
Enabling Innovation Science Australia to issue determinations on R&D activities similar to the ATO’s Rulings program to provide enhanced guidance.