R&D Tax Incentive Policy announced
The Government has now finalised its R&D Tax Incentive policy, having consulted extensively with taxpayers and interest groups since the release of the R&D discussion document in April.
The key design parameters include:
- a credit of 15% (up from the 12.5% originally suggested) for eligible expenditure;
- a $50,000 minimum eligible expenditure threshold (decreased from the $100,000 threshold originally suggested), with a $120m cap on eligible expenditure;
- a cash refund mechanism to allow eligible businesses that are in a tax loss position to claim a refund of up to $255,000;
- no constraints on the type of business that can claim the credit. In particular, State Owned Enterprises are not excluded. However, taxpayers who have received a Callaghan Innovation Growth Grant in an income year cannot claim an R&D tax credit for that year; and
- a “competent professional” test for determining whether expenditure is incurred in seeking to resolve scientific or technological uncertainty (a key eligibility requirement). If a competent professional is unable to resolve the uncertainty without a series of tests or analysis, then the expenditure should meet the test.
We will have to wait and see how these parameters are reflected in the rules. The rules are expected to be included in a Bill to be released later this year, to take effect from the 2020 income year. Those who expect to qualify for an R&D tax credit should review their systems to ensure that qualifying expenditure is being captured and flagged appropriately.
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