8th May, 2018
Federal Budget 2018 – R&D tax incentive changes are a handbrake on innovation
Businesses of all sizes need to follow new steps to claim the R&D tax offset, and there’s a cap for smaller businesses.
The big change is how the rebate is now split between bigger businesses and smaller businesses. Smaller businesses are limited to $4 million on their R&D tax offset claims.
“If we have one issue with this budget it’s our concern about the government’s decision to cap the R&D tax incentive. This will cap creativity and innovation, discouraging investment and growth in the critical startup ecosystem, and for small businesses more broadly,” MYOB CEO Tim Reed said.
“While it’s important to ensure investment is channeled correctly, we know that Australian businesses spend less than two percent of GDP on R&D. This isn’t enough to drive an innovative and globally competitive future.”
“It seems odd to limit this measure when there is wide agreement that we need to lift business investment.”
So, what exactly is changing?
The first step is that the flat 43.5 percent refundable tax offset for smaller businesses has gone. The 38.5 percent non-refundable tax offset for all other applicable businesses is no more. The tax offset rate now depends on how much a company spends as a proportion of its overall expenditure.
This all depends on the size of the company claiming the offset.
The R&D offset will tie the rate of offset to how much a company spends as a proportion of its overall expenditure.
If you’re in the business of R&D, this will stir up the way you do things.
You’ll need to step up your efforts into calculating your R&D investment as a proportion of your overall spending, which means more rigorous reporting and documentation.
If you’re expecting a certain return based on the current offset, you may need to rethink your plans.
Get regular business news and tips in your inbox to help keep your business running.