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Research and Development Tax Incentive

Under the Research and Development (R&D) tax incentive, entities may be eligible for a tax offset for expenditure on eligible R&D activities and for the decline in value of depreciating assets used for eligible R&D activities.

  • Refundable R&D tax offset – Generally only available to eligible entities with an aggregated turnover of less than $20 million.
  • Non-refundable R&D tax offset

A $150 million cap (yet to be enacted) on the amount of R&D expenditure that companies can claim as a tax offset at the concessional rates applies. For expenditure over the cap, companies are able to claim a tax offset at the company tax rate.

For income years commencing from 1 July 2018, the Government proposes to change the current R&D regime and replace it with new R&D tax offset amounts that, when enacted, will be as follows:

  • Refundable R&D Tax offset – The claimant’s tax rate for the year plus 13.5 percentage points (capped at $4 million per annum, except for R&D on clinical trials).
  • Non-refundable R&D Tax offset – The claimant’s tax rate for the year, plus:
    • 4 percentage points for R&D expenditure between 0% and 2% R&D intensity (inclusive) (i.e. R&D expenditure as a percentage of the claimant’s total expenses for the year); 
    • 6.5 percentage points for R&D expenditure above 2% to 5% R&D intensity; 
    • 9 percentage points for R&D expenditure above 5% to 10% R&D intensity; and 
    • 12.5 percentage points for R&D expenditure above 10% R&D intensity.

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