The Commonwealth Treasury has introduced exposure draft legislation (the Treasury Laws Amendment (Research and Development Incentive) Bill 2018 (Cth)(Exposure Draft)), supporting explanatory materials and an associated consultation paper to reform to the Research and Development Tax Incentive (R&DTI). The introduction of this Exposure Draft comes further to the Government’s announcements on 8 May 2018 to reform the R&DTI system to better target the program and improve its integrity and fiscal affordability in response to the recommendations of the 2016 Review of the R&D Tax Incentive.
Broadly, the Exposure Draft proposes the following:
- increasing the R&D expenditure threshold from $100 million to $150 million and making the threshold a permanent feature of the law
- making the R&D tax offset equal to an entity’s corporate tax rate plus a 13.5% premium (i.e. if the corporate tax rate is 30%, the R&D tax offset rate would be 43.5%)
- capping the total amount that is refunded via the R&D tax offset at $4 million per annum and
- increasing the targeting of the incentive to larger R&D entities with high levels of R&D intensity.
The Government has stated that it welcomes stakeholder feedback and notes that the consultation period for the Exposure Draft runs from 29 June 2018 up to 26 July 2018.