R&D Tax Incentive | Budget 2020 | What You Need to Know

There has been much heated discussion and debate over what the R&D tax Incentive should look like.

The R&D grant is Australia’s Number 1 incentive for innovation. Our growing tech industry relies on the R&D Tax credit as a “lifeline” of cashflow to keep innovating and creating cutting edge technology.

This type of funding is especially crucial in the heavy development stage whilst a startup has little or no revenue and are in the stages of building out their product-market-fit.

These are the main take home points you need to know from the 6 Oct 2020 Budget:

Companies with <$20M in Aggregate Revenue

• No changes to 2020 financial year claims
  • That means no money will be clawed or charged back as was proposed (the money you have received is yours)
• Increased refundable R&D offset rate
  • Tax rate plus 18.5%
  • Please note that tax rates are set to reduce to 25% for the 2021-22 financial year which puts the refundable offset 43.5%
• No cap on cash refunds (the $4M suggested cap was not enacted)

Companies with >$20M in Aggregate Revenue

• Non-refundable tax offset at the company tax rate plus:
  • 2-tiered approach
    • 5% for R&D eligible expenditure for companies with between 0% and 2% R&D intensity
    • 5% for R&D eligible expenditure for companies with above 2% R&D intensity
      
      

For All Companies

• Eligible R&D expenditure cap has increased by 50% to $150M from $100M
• Improvements to the system as a whole including administration, integrity, and transparency
  • A new R&D online portal is about to be launched
• An additional circa $2 Billion to be introduced into the scheme by the government to boost Australian innovation
• Changes apply from 1 July 2021
  
  

In Summary

Scott Morrison and Josh Frydenberg have clearly shown that innovation and technology are high up on the priority ladder to get Australia out the COVID 19 recession.

Lior Stein is the Co-MD at Rimon Advisory, a leading Australian R&D Tax Incentive and Export Market Development Grant consulting firm. He is a chartered accountant by profession but an entrepreneur by passion. Lior is a member of the Australian Institute of Chartered Accountants (ICAA) and The Tax Institute.

You may be interested to know if your business could use the R&D Tax Incentive.

We have put together a few quick questions for you to be able to assess your eligibility.

Click below if you want to know more: