InnovationAus Reports Proposed Changes to the R&D Tax Incentive are Now Unlikely to Pass

March 30th, 2020

InnovationAus has reported this week that proposed changes to the R&D tax incentive are now unlikely to pass as legislation this year:

reform bill proposing controversial changes to the R&D Tax Incentive for FY20 was being considered by the Senate prior to the onset of the Covid-19 situation.

This bill is a slightly modified version of a previous reform bill (Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018), which did not pass through the Senate last year. A Senate Economics Legislation Committee recommended in February 2019 that this bill should be deferred from consideration until further analysis of the bill’s impact is undertaken, particularly with respect to concerns around the proposed intensity threshold and refundable offset cap.

A petition has also been circulating amongst the business community this week petitioning against the controversial changes to the R&D Tax Incentive for FY20, whilst also campaigning the Australian government to offer quarterly R&D Tax Offset refunds.

Swanson Reed is in favor of the concept of quarterly R&D Tax Offset credits in principle, however there are logistical challenges presented with its implementation which perhaps make it unfeasible, including:

  • Being able to accurately determine both a company’s tax loss balance AND R&D expenditure on an interim basis throughout the year;
  • InClawback issues in cases where a company may overestimate their R&D Offsets during the year.

The issue of quarterly credits was previously examined during consultations with treasury in August 2012, and it was deemed not feasible to implement.

If a workable model were able to be proposed, Swanson Reed would be in support of it.

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