As part of the Budget Savings (Omnibus) Bill 2016, the Government has once again introduced a measure to reduce the rate of the R&D Tax Incentive by 1.5%. Research Australia has made a submission to the Senate Economics Legislation Committee opposing this measure, as we have done previously.
The reduction will have the greatest impact on small companies who are in receipt of the refundable tax offset. While the 1.5% reduction is intended to reflect the recent reduction in the tax rate for small companies and is there supposedly ‘tax neutral’ the reality is that these small research intensive companies are running at a loss and not paying tax, so they will be adversely affected. Large companies will also be adversely affected because the mooted tax reductions for large companies have not yet been legislated.
The Government has yet to release the report of the Review it commissioned in 2015 into the operation and effectiveness of the R&D Tax Incentive.