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May Budget may impact R&D Tax Incentive

May Budget may impact R&D Tax Incentive

David Gelb discusses the impact of potential significant changes to the R&D Tax Incentive in the upcoming Federal Budget.

David Gelb

Global Head R&D Tax Incentives

KPMG Australia


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Australia’s Treasurer, Scott Morrison, has revealed there may be significant changes to the Research & Development (R&D) Tax Incentive in the Federal Budget. This announcement aligns with recommendations by Innovation and Science Australia (ISA) in 'Australia 2030 Prosperity through Innovation: A plan for Australia to thrive in the global innovation race', which followed on from the original review of the R&D Tax Incentive in the 3F Report.

Key changes could be the introduction of a 1 percent intensity threshold, a $4M cap on the annual refundable amount and a potential $40M lifetime cap on the refundable amount. It is also possible that a collaboration premium will be introduced that will provide a non-refundable tax offset for expenditure spent by the private sector on collaborating with Australian research institutions.

How these changes may be implemented is yet to be seen, but it is clear that the Government intends to rein in the cost of the program. Companies most likely to be adversely affected are those that:

  • have an aggregated turnover of $20M+ and which spend 1 percent or less of their annual total expenditure on R&D or
  • have an aggregated turnover of <$20M and which receive refunds in the millions.

Unless more information is released beforehand, our Federal Budget Brief will provide detailed coverage of how the Budget will impact Government support for private sector innovation.

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KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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