The Federal Government today introduced the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 which seeks to amend the R&D Tax Incentive program.
The changes include a $4 million cap on annual cash refunds for companies with an annual turnover of less than $20 million, with refundable tax offsets to be then calculated as 13.5 percentage points above the claimant’s company tax rate, and an “intensity measure” to determine the size of the offset for larger companies.
The Bill introduced today is very similar to the Bill that was previously introduced in 2018. The 2018 Bill was referred to a Senate Economics Legislation Committee who expressed a number of concerns including that the proposed changes were intended to apply retrospectively to financial years that commenced after 1 July 2018. We are pleased to note that this concern has been addressed with the proposed amendments set to apply to years commencing after 1 July 2019.
The Senate Committee was also concerned with the proposed intensity measure for larger claimants (with a turnover greater than $20 million), where the R&D offset rate is calculated by dividing a company’s expenditure on R&D activities by its total expenses for the income year, finding that this may unintentionally disadvantage Australian businesses that manufacture in Australia as well as those businesses that require large capital investment or that operate on small margins. Accordingly, the committee recommended that the intensity measure be re-examined. Whilst changes have been made to this part of the Bill to “simplify” this by reducing the number of tiers of intensity from 4 to 3, the Senate Committee concerns have not been addressed.
Debate was immediately adjourned. Parliament resumes in February 2020 and we will continue to keep you updated.
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