The R&D Tax Incentive is a targeted, generous and easy to access entitlement program that helps businesses offset some of the costs of doing R&D. The Program aims to help more businesses do R&D and innovate. It is a broad-based entitlement program.

This means that it is open to firms of all sizes in all sectors who are conducting eligible R&D. It provides generous support for businesses, especially small and medium-sized firms, who undertake a program of R&D.

At present the two core components are:

  • A 45 per cent refundable tax offset (equivalent to a 150 per cent deduction) to eligible entities with an aggregated turnover of less than $20 million per annum
  • A non-refundable 40 per cent tax offset (equivalent to 133 per cent deduction) to all other eligible entities.

As part of the 2014-15 Federal Budget, the Australian Government has made a difficult decision to reduce the rate of benefit to all companies under the R&D Tax Incentive, effective from 1 July 2014. The rates of the refundable and non-refundable offsets will be reduced by 1.5 percentage points to 43.5 per cent and 38.5 per cent respectively.

The change will apply for a company’s income years commencing on or after 1 July 2014, subject to the passing of legislation.

More information can be found here.