Keeping up with R&D tax incentive changes

With the federal budget looming, the research and development tax incentive is set to receive a much-needed makeover.

With a range of positive changes and upgrades planned for the R&D incentive post July 2021, the well-known scheme is likely to become more user friendly for a range of organisations and industries. Here are the important changes you need to know about today.

Calling for clarity

Further to the submission, Mr Yasser El-Ansary of the AIC focused on highlighting the need to support entrepreneurs and early-stage tech companies through improved guidance – particularly in the case of tech companies. “This is particularly relevant in the area of eligible software development that continues to be a source of confusion amongst claimants,” he added. The confusion Mr. El-Ansary is referring to includes a number of documents currently on the business.gov.au website, all aimed at eligible software claims yet fail to feature real-world examples of how these claims may work in practice. Fingers crossed future changes will ensure the website becomes an accurate, comprehensive yet simply worded source of information for all claimants.

Ready, set, go

Changes to the R&D incentive will be applied to income years beginning either on, or after, July 1st 2021. You’ll need to lodge your application for registration in the year in which your company hopes to claim the incentive, however, there have been a number of helpful announcements made recently following the disastrous bushfires of 2019-2020, as well as the long-lasting impacts of the COVID-19 pandemic. If for example your accounting period is from January 1-December 31, 2019, your application won’t have to be lodged until March 31, 2021.

Small but mighty

If you’re a small company, you’ll find for the most part the changes set to occur will all be positive. If you’re a company that has an aggregated turnover of less than $20 million per year, the refundable offset will be the company tax rate in addition to 18.5 percentage points. The small company tax rate will also be changing. While there’s no change for FY2020, going forward the rate will drop to 26% for this coming financial year, and then by another one percent across FY022. This may well lead to a range of other benefits that are yet to be seen. One thing to keep in mind – if you’re a small company for tax purposes, you’re defined as having a turnover of less than $50 million. This is different to the criteria currently in place for the incentive.

When in doubt, ask an expert

While the Government plans to improve the program’s transparency through the publishing of R&D claims, they also plan to place a greater focus on enforcing and reviewing applications. If you’re unsure of your R&D tax incentive eligibility, or you simply have eligibility queries, you can always get in contact with the Get Grants team to help you along your journey.