If you are searching online to find what benefits you’re entitled to from the R & D Tax Incentive, you’ll need to be careful, because there are blogs and advice pages out there that are not up to date, and will give you wrong information.
Some significant changes to the R&D Tax Incentive benefits were announced in the 2020 Budget, and the new benefits now apply for
income years starting from 1 July 2021. It’s important to know what the benefits are when you’re planning your R&D – important to know how much you’ll be getting back, either through a cash refund or an offset of your tax.
The RDTI offers tax offsets of a proportion of expenditure on your company’s R&D spend. How much you can claim mostly depends on what size of turnover your company has, and how much R&D you do. To start, your company needs to spend a minimum of $20,000 in a year on research and development to claim the RDTI.
For companies with a turnover of less than $20 million the R&D Tax benefit is a premium of 18.5% above your company tax rate. What this means is that on the 25% tax rate you will be able to claim the R&D tax offset at 43.5% of your R&D spend. And for these companies this is refundable, so you could be getting this amount back as cash!
Companies with a turnover of $20m or more attract an offset rate that can vary depending on how much R&D they do, but it’s not refundable. If their R&D spend (their R&D intensity) is less than 2% of their total expenditure, they attract a premium of 8.5% above the 25% tax rate, so they get 33.5% offset benefit, or 38.5% if they’re on a 30% tax rate.
If companies have a higher R&D intensity than 2%, then for their R&D spend above the 2%, this additional premium jumps up to 16.5% on top of their tax rate, a benefit for that extra spend of 41.5% (25% tax rate) or 46.5% (30% tax rate).
There is also an R&D expenditure cap of $150m for incentive claims.
R&D Certainty is a team of scientists and innovators, who can help you plan and manage your R&D to get the most out of the free support the government provides through the R&D Tax Incentive.
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