Research and Development Tax Incentive (RDTI) | Federal Budget 2020-21 Considerations
The Government delivered welcome news for companies and the Research and Development Tax Incentive (RDTI) program, finally providing clarity and clear support for investment in innovation in Australia. The Government has backtracked on many of the proposed changes announced in the 2018-2019 Federal Budget.
Last night’s Budget evidences the Government’s recognition of the importance of Research and Development (R&D) and investment in Australian innovation and technologies as a key driver for job creation and critical as we emerge and look to recover from the impacts of COVID-19.
From 1 July 2021, the R&D tax offset rates will change – resulting in more favourable outcomes for most claimants. For small claimants (aggregated turnover less than $20m), the Government will increase the refundable R&D tax offset to 18.5% uplift from the claimant’s company tax rate (instead of the 13.5% uplift originally proposed) and the proposed $4m cap on annual cash refunds has been abandoned.
For larger claimants with (aggregated annual turnover of $20m or more), the Government will simplify and streamline the R&D intensity test from three to two tiers and increase the non-refundable R&D tax offset rates. The new non-refundable R&D tax offset will be the company tax rate plus: 8.5% uplift for R&D expenditure up to 2% R&D intensity; and 16.5% uplift for R&D expenditure above 2% R&D intensity.
The Government will still proceed with the increase on the cap on eligible R&D expenditure from $100m to $150m per annum and will retain provisions for improvements to the administration, integrity and transparency of the program. The Government will defer the start date so that all changes apply to income years starting on or after 1 July 2021, with proposed retrospective cuts to the R&D tax offset rates being dropped and claims for the income years ended 30 June 2020 and 30 June 2021 inclusive proceeding under the existing 38.5% non-refundable and 43.5% refundable R&D tax offset rates.
Co-written by Jonathon Pullinger
The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions. By reading this blog, you confirm your understanding of this disclaimer.