R & D Tax Incentives

An eligible R&D entity must undertake at least one core activity. Excluded activities include market research, exploring for minerals or petroleum, management studies and research in social sciences and humanities, among other things.

The benefit received for incurring eligible expenditure on R&D activities depends on the aggregated turnover of the R&D entity. Entities with an aggregated turnover of less than $20 million currently receive a refundable tax offset of 43.5% of eligible R&D expenditure, while entities with an aggregated turnover of $20 million or more receive a non-refundable tax offset of 38.5%.

The proposed changes are that the refundable offset will be pegged at 13.5% more than the entity’s corporate tax rate. Therefore, if there are changes in the corporate tax rate, the rate of the offset will automatically be updated.

The non-refundable offset for R&D entities with an aggregated turnover of $20 million or more will be determined by reference to the the proportion of notional R&D deductions to total expenditure.

Ref: Tax & Super Newsroom. R & D tax incentive changes: Better focus, or misguided?

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