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Special eBulletin - R&DTI Budget Reforms

Special eBulletin: 2020-21 Budget, Proposed reforms to the R&D Tax Incentive

As a part of the Federal Budget 2020-2021 the Australian Government is enhancing proposed reforms to the R&D Tax Incentive. Thes proposed reforms can be viewed here: JobMaker Plan — Research and Development Tax Incentive — supporting Australia’s economic recovery. 

The enhanced R&D Tax Incentive reforms have been informed by extensive stakeholder consultation, and will aim to support companies which undertake the R&D activities that will generate benefits for the wider Australian economy in a post-COVID world.

The enhanced proposed R&D Tax Incentive reform measures include:

  • A refundable R&D tax offset set at 18.5 percentage points above the prevailing company tax rate for small and medium entities (SMEs) with turnover of below $20 million;
  • Not proceeding with the $4 million cap on annual cash refunds for SMEs.
  • A non-refundable R&D tax offset based on R&D intensity for large companies with turnover of $20 million or more, with
    • a baseline rate set at 8.5 percentage points above the prevailing company tax rate for eligible R&D expenditure up to and including 2 per cent R&D intensity; and
    • an enhanced rate of 16.5 percentage points above the prevailing company tax rate for eligible R&D expenditure of more than 2 per cent R&D intensity.

The remaining measures are unchanged from those in the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 currently before the Senate.

The enhanced R&D Tax Incentive reform package supersedes the 2019 Bill, and will form part of a new Bill to be introduced following the 2020-21 Budget. Legislation is required to be passed before these changes can take effect.

To provide companies with the certainty of a further year’s support under the existing program settings through the COVID 19 recovery phase, and provide time to plan and adjust for the new arrangements, the new reform package will apply from 1 July 2021.

For more information about these changes, we encourage companies to visit https://www.industry.gov.au/funding-and-incentives/research-and-development-tax-incentive.

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