R&D tax incentive and innovation.
The forecast storms passed to the south and sunny days ahead.
The government appears to have quietly abandoned the significant changes to the R&D tax incentive announced in the 2018 budget.
The legislation for these changes was stalled in the Senate and, with the upcoming election, without further action, will lapse.
As a result, the change to company tax rate for companies with turnover less than $50 million to 25% is significant for companies eligible to claim the R&D tax incentive.
For companies with less than $50 million turnover, the combination of no change to the R&D tax incentive and the reduced company tax rate results in an increased after-tax R&D benefit of 18.5% (up from 16% currently) for companies with under $20 million turnover and 13.5% (up from 11%) for companies with turnover between $20 million and $50 million.
The after-tax benefit for companies with over $50 million turnover remains at 8.5%. An additional $60 million has been provided in the Budget for EMDG which is a welcome boost for companies looking to develop exports.
- No changes to the current R&D tax incentive legislation (the changes announced in the 2018 budget have been stalled in the Senate and there is no reference to it in the current Budget).
- Extra $60M funding for the Export Market Development Grant (EMDG)
- Innovative companies with turnover under $50M
- Companies looking to grow export markets
If company ABC is profitable and claiming the R&D tax incentive, with turnover of $15 million and spending $1 million on eligible R&D, their after-tax benefit will increase from $160k to $185k with no change to the R&D tax incentive legislation and a company tax rate of 25%.
This benefit will increase the resources available to invest in further innovation, grow their businesses and compete with overseas rivals.