RSM Australia

Innovation | Federal Budget 2019

How will the federal Budget impact corporations

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.

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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.





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  • 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)

 

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  • Innovative companies with turnover under $50M
  • Companies looking to grow export markets

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None.





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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.

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AUTHORS

Richard Wraith

Richard Wraith
Principal, Tax Services