How the October Budget Impacts the R&D Tax Incentive
By Gary Shapiro
28 Oct, 2020
In early October 2020, the Government released their 2020-21 Budget which included some significant changes to the R&D Tax Incentive (RDTI) program. The changes were received well, especially in the start-up community. However, the actual effect of the changes and their presentation in the official documentation could be a little hard to digest and make sense of.
To help unravel the announcement and really understand the impact of the changes, and why they are so good, it is useful to understand the context in relation to two key points:
The table below summarises what the R&D Tax Incentive benefit is under all three scenarios for each financial year.
Note: this only applies to companies with aggregate turnover under $20m.
Ultimately, the net effect is that the refundable tax offset companies receive from the RDTI essentially remains the same - 43.5%. However, there is reason to celebrate:
1. This is far better than the 38.5% the proposed Bill was going to reduce the benefit to.
2. There will be no retrospective changes for companies that have already spent money in the FY20 year, as the new Bill was proposing to do.
Not only is the increased rate important, but so is the stability the Budget gives to companies in knowing that the Government intends to continue to support innovation through research and development as the country works its way out of the pandemic.