1.5% Cuts to the R&D Tax Incentive in the Omnibus Bill

Tax Insights

The Omnibus Bill passed by parliament has cut the rates available under the Refundable and Non-Refundable R&D Tax Offsets by 1.5% for the first $100m of eligible expenditure.

The refundable R&D tax offset rate will be reduced from 45 per cent to 43.5 per cent, and non-refundable rate will be reduced from 40 per cent to 38.5 per cent.  The change will be effective for income years beginning on, or after 1 July 2016.

This cut was included in proposed savings measures by both the Liberal and Labor parties in their pre-election commitments, and although disappointing it was therefore expected that the measure would be passed.

RSM was the only accounting firm that made a submission in regards to the R&D tax cuts to the senate economics legislation committee inquiry established to examine the bill.  The report produced by the senate inquiry noted that, “RSM Australia questioned the potential budget savings from this measure, and provided a detailed analysis in support of its argument that the budget cost of R&D tax offset had been overstated.”

RSM will continue to advocate on behalf of industry in opposing any cuts to government support of Australian R&D, and in particular the R&D Tax Incentive.

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