Last week, the Senate passed amendments to the R&D Tax Incentive program to introduce a $100M R&D annual spending limit to replace the reduced rate of tax incentive for companies with a $20 billion turnover, previously proposed.
The new amendment comes into force from the financial period commencing on or after 1 July 2014, rather than the original 1 July 2013 commencement of the previous proposal.
The original proposed amendments to the R&D Tax Incentive legislation sought to reduce the rate of the tax offset for Australian companies with a turnover of $20 billion or more and was expected to affect 15 – 20 of Australia’s largest companies.
The new amendment, passed by the senate introduces a $100M R&D expenditure cap to replace the $20 billion turnover amendment and is expected to affect another 50 companies including pharmaceutical and manufacturing companies. These amendments are now with the House of Representatives for consideration.
The amendments will allow large companies a reduced tax offset rate for expenditure that exceeds the $100M cap; the reduced rate will be at the standard company tax rate. This effectively means that there will be no additional tax incentive for R&D expenditure in excess of $100M.
The majority of Australian companies including small to medium enterprises (SMEs) are left unaffected.
The 30 April 2014 deadline for registrations is fast approaching for companies who want to claim their R&D expenses for the 2013/14 financial period. Watermark Advisory Services can assist companies in compiling an accurate and timely R&D Tax Incentive application to meet this deadline.