Changes to the Research & Development (R&D) Tax Incentive have been postponed until at least August 2020, after the Senate Economics Legislation Committee’s inquiry report was pushed back due to the COVID-19 pandemic. However the government is planning to implement any legislative changes that do eventually pass retrospectively from the 2019-2020 financial year, meaning businesses may be forced to revise tax returns.
While the legislation postponement is assuring for businesses looking to claim the R&D Tax Incentive, the ATO has confirmed that if the legislation passes it will be legally required to administer the program under current law, which may mean back payments for businesses that claim during the 2019-20 financial year.
The Senate Economics Legislation Committee has been charged with investigating a controversial $1.8 billion in cuts to the scheme. Earlier in 2020 the proposed legislation changes were reintroduced to the Federal Government suggesting a number of changes, including a $4 million cap for smaller companies, a new ‘intensity measure’ for larger businesses and an increase of the expenditure threshold to $150 million.
The potential changes to the incentive have been met with significant criticism from the science and business community, who fear that the changes will result in companies moving R&D activities off-shore where more generous research and development tax incentives are available.
The postponed report means that the legislation will likely not pass in 2020. However, it is best to prepare for the possibility that the legislation will eventually pass and retrospectively applied. To ensure your business is prepared for any potential changes to your R&D Tax Incentive claim speak with your R&D Tax Incentive account manager.