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The Federal Government has reduced the rates of the tax offsetnavailable under the research and development (R&D) tax incentive for thenfirst $100 million of eligible expenditure by 1.5 percentage points. Thenhigher (refundable) rate of the tax offset has been reduced from 45{256a07afe6cf75b7e23500f37551d0affdf8bab65b8226b57f0b6b9aa6c8fc70} to 43.5{256a07afe6cf75b7e23500f37551d0affdf8bab65b8226b57f0b6b9aa6c8fc70}nand the lower (non-refundable) rate of the offset has been reduced from 40{256a07afe6cf75b7e23500f37551d0affdf8bab65b8226b57f0b6b9aa6c8fc70} ton38.5{256a07afe6cf75b7e23500f37551d0affdf8bab65b8226b57f0b6b9aa6c8fc70}. Here are some relevant points to note:
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• nEligible entities with annual turnover of lessnthan $20 million, and which are not controlled by an exempt entity ornentities, may obtain a refundable tax offset equal to 43.5{256a07afe6cf75b7e23500f37551d0affdf8bab65b8226b57f0b6b9aa6c8fc70} of their first $100 millionnof eligible R&D expenditure in an income year, and a further refundable taxnoffset equal to the amount by which their R&D expenditure exceeds $100 millionnmultiplied by the company tax rate.
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• nAll other eligible entities may obtain annon-refundable tax offset equal to 38.5{256a07afe6cf75b7e23500f37551d0affdf8bab65b8226b57f0b6b9aa6c8fc70} of their eligible R&D expenditurenand a further non-refundable tax offset equal to the amount by which theirnR&D expenditure exceeds $100 million multiplied by the company taxnrate.
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The changes apply from 1 July 2016.
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TIP:nAusIndustry and the ATO manage the R&D tax incentive jointly. The R&Dntax incentive aims to offset some of the costs of undertaking eligible R&Dnactivities. A company must lodge an application to register within 10 monthsnafter the end of its income year. Please contact our office for furtherninformation.
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Important: Clients should not act solely on the basis of the material contained in Update. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This update is issued as a helpful guide to clients and for their private information.