The calculation for entities claiming the R&D tax incentive is proposed to change commencing for income years beginning on or after 1 July 2018. The changes for calculating the R&D tax incentive will be based around an “R&D intensity percentage” for each entity. The R&D intensity percentage is based on the amount of R&D related expenditure as a percentage of total company expenditure.
Current rules and proposed changes
Currently, a company must have minimum eligible expenditure of $20,000 per annum to make an R&D tax incentive claim. There will be no change to this rule.
| Company size | Current rules | Proposed rules |
| Aggregated turnover under $20m | 43.5% refundable tax offset | Base rate company: 41% refundable tax offset.
Other company: 43.5% refundable tax offset. |
| Aggregated turnover over $20m | 38.5% non-refundable tax offset | 40% or 42.5% if intensity percentage greater than 10%. |
| 36.5% or 39% if intensity percentage between 5% – 10%. | ||
| 34% or 36.5% if intensity percentage between 2% – 5%. | ||
| 31.5% or 34% if intensity percentage between 0% – 2%. |
For companies under $20m in aggregated turnover, a $4m limit on the cash refund will apply from 1 July 2018. Amounts above $4m will be carried forward as a non-refundable tax offset.
For companies over $20m in aggregated turnover, the difference in the percentage offset is based on the company tax rate. Companies who are base rate entities will have the lower R&D tax incentive offset.
Change in maximum eligible expenditure
Currently, there is a limit of which a company can claim the accelerated rates for the R&D tax incentive. Above this limit, the R&D tax incentive can still be claimed but only at the entity’s corporate tax rate. It is proposed in the budget announcement that the maximum eligible expenditure to get the concessional rates will rise from $100m per entity per year to $150m.
Source: CCH iKnow
