You need to know about some significant improvements for companies claiming the R&D Tax Incentive that arrived in the 2021 income year. These are for R&D activities conducted from 1 July 2021.
For companies with a turnover of less than $20 million the R&D Tax benefit is now pegged at 18.5% above your company tax rate. What this means is that if your company is paying 25% tax then you will be able to claim the R&D tax offset at 43.5%. And for these companies this is refundable, so you could be getting this amount of cash back!
None of the limitations that had been anticipated will now pass so there is no cap on cash refunds.
For large companies there is a simplification and an improvement in the way in which the R&D Tax Incentive is calculated.
Companies in the $20m to $50m bracket lose out slightly as their offset is pegged at +8.5% above the 25% (for the initial R&D spend below 2% of total), so they get 33.5% not 38.5% as today, but as their tax rate is going down, the net gain stays the same.
If companies have a higher R&D spend than 2% R&D intensity then this rate jumps up to 16.5% which brings the overall rate to 46.5%.
This is a really significant increase and, to my knowledge, puts Australia at the highest level of international peers for providing incentives for large companies to conduct significant R&D. It will be really interesting to see how large companies respond to this in rehoming their R&D to Australia. For large companies the maximum claimable R&D spend will be increased to $150 million from $100 million.
In these tough times for business, the R&D Tax Incentive is a welcome an increase in appeal. This is understandable because the return to the economy for every dollar spent on R&D is 1:12. There is no better way to ensure a strong future for the national economy than to encourage business to do more R&D.
If you want to know more about how your innovations can be turned into R&D, then please contact us for a no obligation consultation and discussion about how you to0 can receive a generous cash or tax rebate benefit from the Government.
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