Government introduces law to give effect to R&D changes 

The Government has introduced Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 into Federal Parliament which, among other things, makes amendments to give effect to the 2018-19 Federal Budget proposal to better target the Research and Development (R&D) incentive. Specifically, the changes proposed to take effect for income years commencing on or after 1 July 2018 include: 

  • increasing the R&D expenditure threshold from AUD 100 million to AUD 150 million and making the threshold a permanent feature of the law 
  • for small R&D entities (with aggregated turnover of less than AUD 20 million): 
    •  linking the R&D tax offset for refundable R&D tax offset claimants to claimants’ corporate tax rates plus a 13.5 percentage point premium. 
    • capping the refundability of the R&D tax offset at AUD 4 million per annum (however, offset amounts that relate to expenditure on clinical trials do not count towards the cap and remain refundable); and 
  •  for large R&D entities (with aggregated turnover of AUD$20 million or more), limit the amount of the R&D tax offset to their corporate tax rate plus a premium based on the level of their incremental R&D intensity for their R&D expenditure. 

In addition, other amendments are proposed to enhance the integrity and improve the administrative framework of the R&D Incentive.  ATO to publish corporate tax transparency data later this year 

The Commissioner of Taxation is required to annually publish certain tax information for all corporate tax entities (companies and other entities taxed in a similar manner to companies) with total income of at least AUD 100 million (as disclosed in its income tax return), except Australian-owned private companies with total income of less than AUD200 million. In addition, information will also be reported for an entity reporting petroleum resource rent tax (PRRT) payable. 

The Australian Taxation Office (ATO) is preparing to publish the corporate tax transparency data of relevant entities later this year. Specifically, all identified entities should have received a letter in September 2018 advising of the details to be published for the 2016-17 income year, including entities whose tax returns were either lodged or processed after 1 September 2017 for the 2014–15 and/or 2015–16 years, if the information had notbeen published previously. 

Tribunal finds taxpayer not engaged in R&D activities 

The Administrative Appeals Tribunal in Moreton Resources Ltd v Innovation and Science Australia [2018] AATA 3378 has affirmed the decision of Innovation and Science Australia confirming that certain activities in respect of the design and development of an integrated underground coal gasification process which the taxpayer had applied for registration were not R&D activities as defined in s355-20 of the Income Taxation Assessment Act 1997. 

Inquiry into the implications of removing refundable franking credits 

The House of Representatives Standing Committee on Economics has launched an inquiry for report on the use of refundable franking credits, their benefits and the implications of their removal. The terms of reference for the inquiry (which is seeking submissions before 2 November 2018) include: 

  • analysis of who receives refundable franking credits, the opportunities it provides to offer alternative savings and investment vehicles to low and middle income earners, and the impact it has on lowering tax   
  • consideration of how refundable franking credits support tax principles, particularly implications for tax neutrality, removal of double taxation and fairness 
  • if refundable franking credits are removed, who would be impacted, and the implications from expected behavioural change by investors.