In his Budget speech, the Federal Treasurer, Dr Jim Chalmers, has announced some major changes to the R&D Tax Incentive (RDTI).
In summary,
- Increasing the offset for core R&D activities by around 25 to 50 per cent and removing eligibility for expenditure that only supports R&D. This sees all core R&D offset rates increase by ~4.5 percentage points.
- The intensity threshold for non-refundable taxpayers will reduce to 1.5 per cent, providing higher offsets to firms undertaking substantial core R&D.
- Providing greater support to young, fast‑growing firms by increasing the turnover threshold for the higher refundable offset to $50 million. Refundability will be limited to firms operating less than ten years, with older firms eligible for an equivalent non‑refundable offset.
- Increasing the maximum expenditure cap to $200 million, encouraging more R&D onshore.
- Improving assurance by increasing the minimum annual R&D expenditure threshold to $50,000. R&D expenditure below this amount must be undertaken with a Research Service Provider or Cooperative Research Centre in order to qualify for the RDTI.
There is much to absorb and much to admire in these announcements as they clearly reflect a commitment to strengthening the Australian innovation economy. Most of the changes are consistent with the recommendations contained in the Final Report of the Strategic Examination Of Research & Development (SERD) which was released in March and we are pleased that some of the more concerning aspects of the changes suggested by the SERD Expert Panel have not been adopted.
We will publish an MJA Update later this week to review the impact of these announcements, and we will identify the major questions that will have inevitably risen. For now, we note that there has been no consultation with the Australian innovation marketplace since the publication of the SERD Report and we reiterate that this is critical if the Government is to successfully legislate and sustainably deliver its better-targeted RDTI.
Should you wish to discuss any aspect of this article, do not hesitate to contact MJA.