The proposed 1.5% cut to the R&D tax incentive will not go ahead as the Bill before the Senate has lapsed, and will not proceed.

The cuts, aimed at reducing the rate of the Incentive from:

  • 45% to 43.5% for companies with a turnover of $2-$20M, and
  • 40% to 38.5% for larger companies of $20 million or greater,

were originally introduced to coincide with the then proposed reduction of company tax rate of the 1.5%.

With this implementation for company tax rate reduction being withdrawn some time ago, the threat to reduce the rate of the R&D tax incentive by 1.5% points remained until this week.

This is especially good news for small innovative companies with a turnover of less than $2 million who, by order of their tax rate reducing from 30% to 28.5% introduced in last year’s budget, see a benefit of the R&D tax offset at an effective 46.5%.

This is good news for Australian companies undertaking R&D and provides more certainty in R&D planning.

The current review of the R&D tax incentive by a Government taskforce in relation to the effectiveness and integrity of the programme, is ongoing and we expect the report to be issued shortly.