In Tuesday’s budget announcement, Treasurer Josh Frydenberg revealed that the government is removing the $4 million cap on annual cash refunds and instead lifting the rate.
“Mr Speaker, research and development, the adoption of digital technology, and affordable and reliable energy will be critical to Australia’s future economic prosperity,” Mr Frydenberg said.
“In this budget, we are providing $2 billion in additional research and development incentives, removing the cap on refunds, lifting the rate and rewarding those businesses that invest the most.”
According to the rules, for small companies, those with aggregated annual turnover of less than $20 million, the refundable R&D tax offset is being set at 18.5 percentage points above the claimant’s company tax rate.
For larger companies, those with aggregated annual turnover of $20 million or more, the government will reduce the number of intensity tiers from three to two.
According to the rules, the R&D premium ties the rates of the non-refundable R&D tax offset to a company’s incremental R&D intensity, which is R&D expenditure as a proportion of total expenses for the year. The marginal R&D premium will be the claimant’s company tax rate plus:
- 8.5 percentage points above the claimant’s company tax rate for R&D expenditure between 0 per cent and 2 per cent R&D intensity for larger companies;
- 16.5 percentage points above the claimant’s company tax rate for R&D expenditure above 2 per cent R&D intensity for larger companies.
Additionally, the government will defer the start date so that all changes to the program apply to income years starting on or after 1 July 2021.
All other aspects of the 2019–20 MYEFO measure will remain unchanged, including the increase to the R&D expenditure threshold from $100 million to $150 million per annum.
This measure is estimated to decrease the underlying cash balance by $2.0 billion over the forward estimates period.