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Cap most contentious part of R&D tax offset overhaul


The cap on cash refunds as part of proposed government changes to the research and development (R&D) tax incentive will likely cause problems for some businesses, a tax veteran predicts.

By Adrian Flores 9 minute read

For companies with aggregated annual turnover below $20 million, cash refunds from the tax offset will be capped at $4 million per annum.

In addition, refundable R&D tax offsets from R&D expenditure on clinical trials will not count towards the cap.

Speaking to Accountants Daily, Thomson Reuters tax consultant, Terry Hayes, said the most contentious parts of the R&D tax overhaul are to do with the caps.

“I think the $4 million cap has caused a bit of a stir,” he said. “The caps were originally suggested to be at $2 million. Now they're $4 million, so they've doubled them, which I think is a good thing.

“But I think other companies, particularly those on the medical and pharmaceutical side, probably would not be overly warm towards that cap.”

As for why the cap is being put in place, Mr Hayes believes the government figures that it needs to try and take control of the incentive, and make sure that the expenditure is being made for the right purposes.

Regardless, he said the caps will cause a few problems for businesses.

“In simple terms, I guess the cap could’ve been higher than they set it,” Mr Hayes said.

“The payments are trying to cause companies to spend a certain amount before they get the R&D tax offset, but I think a lot of companies might just say the cap shouldn't have been done.”

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Adrian Flores


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