In last week’s Federal Budget, the government announced some long-awaited reforms to the R&D Tax Incentive, to boost its integrity and provide much needed clarity for how companies can claim the incentive moving forward. There was some good news:
- A $4 million annual cap on cash refunds for early-stage start-ups, instead of the proposed $2 million, and no lifetime cap on claims.
- Raising the R&D expenditure threshold from $100m to $150m, allowing larger companies to continue to be rewarded for additional R&D they undertake as they grow.
- And there is a provision for Innovation and Science Australia (ISA) to be able to produce more accurate and plainly-worded guidance about what constitutes eligible R&D, which will be important in helping companies interpret the rules.
On the downside, a cut to the R&D tax offset rate and the government’s focus on ‘additionality’ (that is, driving R&D levels beyond ‘business as usual’) means many companies may miss out on incentives they have been able to claim previously. The government expects to save $2.4 billion over four years.
This money could be invested back into the economy in the form of grants. Or incentives for businesses and universities to collaborate. Or dedicated funding to drive translational activities, as resources are often limited in this area.
Even Alan Finkel, one of the authors of the 2016 Review of the R&D Tax Incentive noted “work remains to be done.”