Uncertainty over research tax incentives reigns as scheme tightened

Australian startups say there’s still uncertainty over what qualifies as “research and development” for tax purposes and legislation that aims to change tax incentive claims won't help matters.

More than $2.4 billion of savings from changes to the research and development tax incentive program were outlined in the May budget. These changes are now working their way through parliament after the government attached them to a tax bill to fight multinational tax avoidance two weeks ago.

The tax offsets scheme was marked for review after a treasury report on the system suggested placing caps on the amount that could be claimed.

The legislation currently before the House of Representatives makes a number of key changes that affect how much companies can claim and how their research spending is scrutinised.

For companies with turnover of $20 million or less, it caps the cash refunds available for research and development at $4 million. It also changes the tax offset rate for these companies from a flat 43.5 per cent to their corporate tax rate, plus 13.5 per cent. Read more