Federal Budget March 2022 – R&D Tax Incentive Update (no major changes, thankfully!)

March 30th, 2022

Leading into the May 2021 and March 2022 budgets, there were no anticipated changes proposed to the R&D Tax Incentive, since the previously announced changes for FY22 had only recently been legislated and commenced.

Based on a preliminary review of the 2022 budget material, no material changes seem to have been proposed to the R&D Tax Incentive, which, after a tumultuous period over the past decade, is good news!

Interestingly, in the 2022 budget papers for the Industry, Science, Energy and Resources Portfolio:

  • A key performance outcome is noted as being:
    • Support economic growth, productivity and job creation for all Australians by investing in science, technology and commercialisation, growing innovative and competitive businesses, industries and regions, and supporting resources;
  • A performance measure linked to the outcome is specified as:
    • R&D expenditure registered by entities with the department in order to claim the R&D Tax Incentive through their annual tax returns;
  • The update on performance results for this measure notes that it is:
    • On track.

Some other measures announced in the March 2022 Federal Budget that may indirectly impact on R&D claimants include the following:

  • Patent Box Initiative:
    • Expansion of patent box to agriculture and low emissions energy sectors, after it was originally announced in the 2021 budget for the medical sector. The Patent box scheme allows income related to profits on new patents to be taxed at a lower rate;
  • Employee Share Schemes:
    • Enhancements to schemes allowing companies to issue shares to employees;
  • Tax benefits for technology:
    • Small businesses (turnover less than $50M) investing in digital adaptation can attain a 20% uplift on deductions for their expenditure;
  • Sovereign Manufacturing Initiatives:
    • Funding related to developing local manufacturing capability and collaboration between our universities, CSIRO and industry.

A federal election is now due to be held by May 2022. The opposition Labor party has indicated that if they win government, they would conduct their own budget later in 2022

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