To support the government’s plan to invest $1.5 billion to promote manufacturing in Australia, the federal budget has now revealed “refinements” to its existing R&D tax incentive bill.
Instead of saving the government $1.8 billion under the current R&D tax incentive bill before the Senate, the government will now commit $2 billion to the tax incentive.
The changes include the scrapping of the $4 million refund cap for companies with an annual turnover of less than $20 million.
The refundable R&D tax offset for small companies will also be set at 18.5 percentage points above the claimant’s company tax rate, up from 13.5 per cent from the current bill.
Companies with an annual turnover of $20 million or more will still face a tiered intensity approach but will now see two tiers instead of three.
The marginal R&D premium will be 8.5 percentage points above the claimant’s company tax rate for R&D expenditure between 0 per cent and 2 per cent R&D intensity, while R&D expenditure above 2 per cent R&D intensity for larger companies will see the premium rise to 16.5 percentage points.
The government will also defer the start date of the changes to 1 July 2021, giving certainty to businesses that R&D tax claims made in relation to the 2019–20 and 2020–21 income years would be subject to currently enacted legislation.