The Tax Laws Amendment (Research and Development) Bill 2013 has now moved to the Senate after being passed by the House of Representatives with no further amendments.
The Bill proposes to amend the Income Tax Assessment Act 1997 to deny access to the research and development (R&D) tax incentive for companies and company groups with aggregated turnover of $20 billion or more in an income year.
The amendment will apply to the income years of relevant entities starting on or after 1 July 2013 and is expected to affect around 1% of claimants or around 15-20 corporate groups Australia wide.
In another amendment from the original R&D tax legislation, the government has confirmed that it will not implement the quarterly tax credits for companies with an aggregated turnover of less than $20 million, entitled to the 45% refundable tax offset.
The quarterly credits were intended to take effect from 1 January 2014 and would have provided eligible taxpayers with the option to claim anticipated R&D refunds on a quarterly basis. This option was of particular interest to start up companies and biotechnology companies to assist with cash flow to offset the cost of ongoing R&D on a quarterly basis rather than annually.
While disappointing to many companies, the planned implementation was administratively complex and the risk of inaccurately predicting the R&D spend quarterly was significant given the nature of research and development activities.