The Government on Tue 7.5.2013, released draft legislation designed to better target access to the R&D tax incentive. The proposed change would target support to companies with aggregate assessable income of less than $20 billion.
The change would add a third tier to the R&D tax incentive [see EM extract below] whereby companies with aggregate assessable income of $20bn or more would no longer be eligible to access the 40% non-refundable tax offset, and would have treat the expenditure like any other (eg. deduct it where appropriate).
DATE OF EFFECT: The change will apply to income years starting on or after 1 July 2013.
COMMENTS are due by 20 May 2013.
[LTN 85, 7/5/13]
Extract from EM
1.4 The two components of the R&D incentive are:
- a 45 per cent refundable R&D tax offset for eligible entities with a turnover of less than $20 million; and
- a non-refundable 40 per cent R&D tax offset for all other eligible entities [but now with a $20b aggregate assessable income cap].
1.5 On 17 February 2013, the Government announced changes to ‘better target’ the R&D tax incentive…
…
1.10 These amendments limit the R&D tax incentive to entities with aggregated assessable income of less than $20 billion in an income year. An entity with higher aggregated assessable income would then treat the expenditure in the same way as other expenditure, for example, as a deduction. This denies access to the R&D tax incentive for entities that are less likely to engage in additional R&D in response to Government incentives. [Schedule #, item 1, subsection 355-103(1)]
Extract from Draft Amendment
Schedule ??—Targeting R&D tax incentive to small and medium businesses
Income Tax Assessment Act 1997
1 After section 355‑100
Insert:
355‑103 Exception for large businesses
(1) Despite section 355‑100, an *R&D entity is not entitled under that section to a *tax offset for an income year if its amount worked out under subsection (2) for the income year is $20 billion or more.
R&D entity’s aggregated assessable income
(2) The *R&D entity’s amount for the income year is the sum of:
(a) its assessable income for the income year; and
(b) the assessable income for the income year of any entity that is *connected with the R&D entity at any time during the income year; and
(c) the assessable income for the income year of any entity that is an *affiliate of the R&D entity at any time during the income year; and
(d) the assessable income for the income year of any entity of which the R&D entity is an affiliate at any time during the income year.
2 Application of amendment
The amendment made by this Schedule applies in relation to an R&D entity’s assessments for income years commencing on or after 1 July 2013.