The Australian Taxation Office (ATO) released a revised guidance providing an explanation regarding the R&D tax incentive offset rates for a qualifying entity on Tuesday, 21 May, 2024.
The research and development (R&D) tax incentive provides targeted tax offsets designed to encourage more companies to engage in R&D.
The incentive has two core components. For income years starting on or after 1 July, 2021, entities engaged in R&D may be entitled to:
- A refundable tax offset equal to the entity’s company tax rate plus an 18.5% premium for eligible entities with an aggregated turnover of less than AUD 20 million per annum, provided they are not controlled by income tax-exempt entities.
- A non-refundable tax offset for all other eligible entities equal to the entity’s company tax rate plus a two-tiered premium determined on the notional R&D expenditure as a proportion of total expenditure for the income year. The new rates will be the company tax rate plus 8.5% for R&D expenditure up to 2% of total expenditure and 16.5% for R&D expenditure above 2% of total expenditure.
Entities may be able to carry forward unused offset amounts to future income years. The rate of the R&D tax offset is reduced to the company tax rate for that portion of an entity’s notional R&D deductions that exceeds AUD 150 million for an income year.
More information is available at the ATO website.
