The Government has reintroduced an R&D tax offset rate cut which was first announced as part of the 2014-15 Budget on 13 May 2014. The Budget Savings (Omnibus) Bill 2016 is seeking to reduce the rates of the tax offset available under the R&D tax incentive as follows:
The refundable R&D tax offset for companies with an aggregated turnover of less than $20 million will be reduced from 45% to 43.5%; and
The R&D tax offset for companies with an aggregated turnover of more than $20 million will be reduced from 40% to 38.5%.
The changes do not affect the eligibility of entities to claim the R&D tax incentive nor the administration of the R&D tax incentive.
The proposed measures apply to income years commencing on or after 1 July 2016 and they are not intended to apply retrospectively. Once enacted, the benefit of the R&D tax offset for companies will be reduced for the 2016/17 financial year.
Whilst the reduction in the R&D offset flies against Australia’s recent push to become a centre for innovative companies, we do not believe the rate cut will discourage ongoing research and development activities in Australia.