Research & Development Tax Incentive

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From 1 April 2019 a change is proposed to Research and Development Tax incentives.    The current cash out of tax losses approach is effectively a loan of 28% of Research & Development tax losses which is repaid when the business makes a profit.  The new regime proposes a tax credit for 15% of eligible Research & Development expenditure.  There would be a limited form of refundable tax credits. 

A minimum spend of $50,000 per annum on Research & Development would be required to be eligible, up to a cap of $120milliion.  The incentive would apply to Research and Development performed using a systematic approach for the purpose of acquiring new knowledge or creating new or improved processes, services or goods and must seek to resolve scientific or technological uncertainty. 

Activities that are proposed to be included in eligible Research & Development are direct costs including salaries, depreciation and consumables used in the Research & Development.  Excluded activities include market research and testing, quality control, cosmetic or stylistic changes, reverse engineering of an existing commercial product, or pre-production activities (ie testing commercial viability and trial runs).

This could be something to consider if your business is involved in a substantial amount of Research & Development.  It will be important to keep detailed documentation of the work carried out.

Joanne Whyte