To keep you up to date with the recent R&D changes, our update will cover:
- Federal budget update
- R&D and Jobkeeper
- New R&D portal
- R&D and depreciating assets
- Patent box regime
- Digital games tax incentive
Federal budget update
From 1 July 2021, eligible R&D entities will receive an ‘R&D uplift’ at a fixed percentage above the entities’ company tax rate.
There will now be three ‘tiers’ of R&D uplift, based on aggregated turnover and ‘R&D intensity’:
|Aggregated turnover||R&D Intensity||R&D Net Benefit|
|< $20 Million||N/A||18.5% 1|
|$20 Million or above||< 2% 2||8.5%|
|$20 Million or above||2% or above 2||16.5%|
1 The 18.5% uplift will be in the form of a refundable tax offset. This may result in the entity receiving up to 43.5% of R&D expenditure as cash back depending on their taxable position.
2 ‘R&D intensity’ is calculated as a portion of R&D expenses over total company expenses. This measure is only applicable to entities with aggregated turnover of $20 million and above.
R&D and JobKeeper
Salary and wage expenditure can be claimed where it has a nexus to the R&D activities conducted. However, in line with the Draft Tax Determination TD 2020/D1, where a company receives JobKeeper for an R&D employee, they cannot deduct the portion of wages that attracted the JobKeeper payment. These JobKeeper adjustments were required for 30 June 2020 R&D claims, and will continue for the upcoming year (i.e. year ended 30 June 2021).
New R&D portal
A new R&D portal has been launched to make it easier for companies to manage their R&D applications moving forward. The new portal includes:
- An online space for users and their authorised representatives to manage their interactions with the R&D tax incentive program;
- An updated application form to assist users with understanding the R&D eligibility criteria; and
- Improved security using myGovID digital identity services.
Applicants can submit claims under the new portal from 5 July 2021.
R&D and tangible depreciating assets
In the recent budget, the Government has extended its stimulus measures allowing businesses to claim an immediate deduction for the cost of tangible depreciating assets in the year in which they are installed ready for use. It is worth noting that in some circumstances where the assets are used in conducting R&D activities, there may be scope to claim a notional R&D deduction for the full cost of the asset. This can result in a significant uplift in R&D claims for companies purchasing tangible deprecation assets over the coming period.
Patent Box Regime
The government has also recently announced a new patent box regime, which is designed to encourage innovative companies to commercialise their innovations in Australia. The regime will be effective from 1 July 2022 and will apply to:
- Income derived from Australian owned and developed medical and biotechnology patents;
- Patents which were applied for after the budget announcement.
The income derived from eligible patents will be taxed at a rate of 17%. This represents a reduction of 8% for small businesses and a reduction of 13% for larger businesses.
Digital Games Tax Incentive
As part of Australia’s ‘digital economy’ strategy, a new digital games tax incentive has been announced. The digital games tax incentive will provide a 30% refundable tax offset.
The offset will start from 1 July 2022 and there will be a minimum spend threshold of $500,000.
Further detail on the incentive is expected to be provided mid 2021 following a consultation process.