Research and Development

The 2018-2019 Federal Budget included a number of changes to the current research and development (R&D) incentives that may have an impact on your business from 1 July 2018.

Please note that at this stage these are proposed changes and legislation has not yet passed through Senate.

Companies with aggregated annual turnover below $20 million:

A $4 million annual cap on cash refunds for R&D will be introduced (excluding certain clinical trials)
Amounts in excess of the cap will become a non-refundable tax offset that can be carried forward to future income years
The R&D offset will be linked to the R&D claimants tax rate plus 13.5% –
- if the tax rate of the entity is 27.5%, the offset will be 41% (previously 43.5%). These entities will therefore lose a 2.5% benefit under the proposed change
- if the tax rate of the entity is 30%, the offset will be 43.5%. These entities will be unaffected by the change

Companies with aggregated annual turnover of $20 million or more:

The non-refundable R&D tax offset will be tied to the ‘incremental intensity’ of the R&D expenditure
The rate of the R&D offset will increase with the level of R&D spend (the greater the intensity, the higher the rate) thus resulting in multiple rates of offsets. The marginal R&D premium will be the claimant’s company tax rate plus:
- 4% for R&D expenditure between 0% to 2% R&D intensity
- 6.5% for R&D expenditure above 2% to 5% R&D intensity
- 9% for R&D expenditure above 5% to 10% R&D intensity
- 12.5% for R&D expenditure above 10% R&D intensity
The annual cap on R&D expenditure will be raised from $100 million to $150 million

Stronger integrity measures

The Government also announced improvements to the integrity of the R&D program such as:

Funding to the ATO and AusIndustry for auditing claims and enforcement activity against ineligible claims
Publishing R&D claimant names and the amount of R&D expenditure they have claimed
Imposing a three month limit on extensions of time for due dates of applications, registrations and reviews

Other Government Grants and Incentives

Export Market Development Grant (Federal)

The Export Market Development Grants (EMDG) scheme is a key Australian Government financial assistance program for aspiring and current exporters
The scheme reimburses up to 50% of eligible promotion expenses related to developing export markets and securing overseas sales
To be eligible, the business must have:
- income of less than $50 million in the grant year
- incurred at least $15,000 of eligible expenses under the scheme (first-time applicants can combine two years expenses)
Applications are open from 1 July 2018 until 30 November 2018 for marketing expenditure paid in the 2018 financial year
Find out more here – https://www.austrade.gov.au/Australian/Export/Export-Grants

Business Growth Fund Program (Queensland businesses only)

Funding of up to $50,000 is available, with 25-50% matched by the business
For upcoming purchase and implementation of specialised equipment or services (consultants,mentors, IP advice, etc.) to help SME’s seize growth opportunities
Eligibility requirements include minimum trading history of 3 years, minimum turnover of $500,000 for the last financial year and less than 50 employees at grant application date
Round 1 is open for applications
Find out more here – https://www.business.qld.gov.au/starting-business/advice-support/grants/growth-fund

Queensland Jobs & Regional Growth Fund (Queensland businesses only)

Funding from $100,000 to $10 million is available in either direct grants or relief of state charges
For upcoming projects involving expansion into regional Queensland with a focus on growth proposals that maximise benefits for regional employment
Ideally for medium to large businesses in various industries (agriculture, tourism, manufacturing, etc.)
Currently open for Expressions of Interest
Find out more here – https://statedevelopment.qld.gov.au/industry/industry-support/jobs-and-regional-growth-fund.html

Further help:

The Marsh & Partners team are able to provide advice and assist with R&D legislation as well as government grant applications.

If you would like to talk further about the financial help your business may be entitled to, you can reach us on (07) 3023 4800 or at mail@marshpartners.com.au.

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