Aims of the R&D program #
The research and development (R&D) tax incentive aims to boost competitiveness and improve productivity across the Australian economy by:
- encouraging industry to conduct R&D that may not otherwise have been conducted
- improving the incentive for smaller firms to undertake R&D
- providing business with more predictable, less complex support.
Changes since 1 July 2021 #
The following changes were announced in 2020 to the R&D tax incentive that apply for income years commencing on or after 1 July 2021:
- The refundable offset rate of 43.5% has been replaced with an offset rate of 18.5% above the company’s tax rate.
- The flat non-refundable rate of 38.5% has been replaced with a progressive marginal tiered R&D intensity threshold. Increasing rates of benefit apply for incremental research and development expenditure by intensity:
- 0 to 2% intensity: an 8.5% premium to the company’s tax rate
- greater than 2% intensity: a 16.5% premium to the company’s tax rate.
- The expenditure threshold has increased from $100 million to $150 million. For notional deductions above $150 million, the R&D tax offset rate is the corporate tax rate. The R&D premium does not apply.
- The feedstock, clawback and adjustment provisions have been replaced with an exact amount rather than an approximation.
- The general anti-avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 includes an R&D tax offset as a tax benefit from 1 July 2021.
- The ATO is required to publish a company’s claimed R&D expenditure. The first publication is to be made 2 years after the end of the financial year, and as soon as practicable after 1 July 2024.
Anti-avoidance rules #
The general anti-avoidance rule of Part IVA of the Income Tax Assessment Act 1936 now includes R&D tax offsets as a tax benefit for Part IVA from 1 July 2021.
A tax benefit arising out of on R&D claim may be summarised as:
- The R&D entity entered into a scheme to access the R&D tax offset.
- A tax benefit is received in connection with the scheme.
- The dominant purpose of the R&D entity entering into the scheme is to either:
- enable it to get the R&D tax offset
- get a refundable R&D tax offset where it would have or reasonably be expected to have obtained a non-refundable R&D tax offset.
If Part IVA applies to an arrangement, the tax benefits obtained from the arrangement can be cancelled.
Publishing a company’s R&D expenditure #
We are required to publish R&D expenditure claimed by an R&D entity 2 years after the end of the financial year. The first publication will be as soon as practicable after 1 July 2024 for the income year ending 30 June 2022.
Publishing this information will improve public accountability for R&D claimants and encourage voluntary compliance with the R&D program.
The information we publish from the forms lodged with us includes:
- the name of the R&D entity
- Australian business number (ABN) or Australian company number (ACN)
- notional deductions claimed (less any feedstock adjustments).
