Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Better targeting the Research and Development Tax Incentive

Aust Gov
7th November 2018

Regulation Impact Statement – Department of Industry, Innovation and Science

On 20 September 2018, the Government introduced legislation to better target the Research and Development Tax Incentive (R&DTI).

The R&DTI reduces the costs to business of undertaking R&D by offering a tax offset for their eligible R&D activities. The R&DTI aims to increase investment in business R&D beyond that which companies would do on their own. The program recognises that businesses are likely to underinvest in R&D as they are unable to capture all the benefits of R&D that ‘spillover’ to the rest of the economy.

The changes proposed better target the R&DTI to reward additional investment in R&D while also ensuring the integrity and fiscal affordability of the program. The reforms will support and reward higher, more intensive, additional R&D investment by introducing an R&D Premium for larger companies based on their R&D intensity. This reflects findings that among larger companies, those with higher R&D intensity provide the greatest benefits to the Australian economy.

The reforms also place a cap on the amount of cash refund that smaller businesses in a tax-loss situation can receive in an income year. Other elements include strengthened anti-avoidance rules and enhanced transparency measures. Together the changes are expected to increase the program’s effectiveness and integrity.

The Department of Industry, Innovation and Science prepared a Regulation Impact Statement (RIS) in collaboration with the Department of the Treasury. The RIS was assessed by the Office of Best Practice Regulation (OBPR) as compliant and best practice under the Governments RIS requirements.

The RIS estimates that the changes will increase average annual regulatory costs for businesses by $25.2 million. The OBPR agreed to this estimate.

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