Accounting & Tax, R&D Tax Incentive, Scaleups, Startups

R&D Tax Incentive 2020 Budget Updates

2020 Budget R&D Article

How does the 2020 Federal budget impact access to the R&D Tax Incentive? Read on to find out more.

So what has happened to R&D Tax Incentive 2020? After a long and nervous wait, and a number of delays to the senate committee report into the proposed R&D Tax changes, the 2020 Federal Budget has finally clarified the Government’s position, with an additional commitment of $2 billion the program (essentially reversing what was previously a $1.8 billion cut).

    In contrast to the prior bill, the new proposed changes are as follows:

  • The Refundable Tax Offset for companies with less than $20 million aggregated turnover will be set at 18.5% above the claimant’s company tax rate (up from the proposed bill’s rate of 13.5% premium and current premium of 16%)
  • The scrapping of the proposed $4 million refund cap for companies with an annual turnover of less than $20 million
  • The proposed tiered intensity approach for Non-Refundable Tax Offsets (for companies with greater than $20 million aggregated turnover) will be adjusted to only two (2) tiers. R&D expenditure at 0 – 2 % R&D intensity will attract a premium of 8.5%, with R&D expenditure above 2% R&D intensity will attract a premium of 16.5%. The current premium is 8.5% for most large companies. R&D intensity is measured by a company’s R&D expenditure divided by their total expenses for the year
  • As planned, the threshold for annual eligible R&D expenditure will be increased from $100 million to $150 million

Whilst the previous bill (if implemented) would have had a start date going back to 1 July 2020, the new bill will see the start date pushed out to 1 July 2021, meaning that the 2020 and 2021 income years will continue with the same legislation and no retrospective changes will have to be made by companies who have already lodged their 2020 Company Tax Return.

These changes have been welcomed by the R&D community and, together with the already announced $1.5 billion bill to promote manufacturing, represent a step in the right direction for the Australian innovation community.

If you have any questions about the R&D Tax Incentive, please reach out to the Fullstack team to discuss in more detail.

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