Budget 2014: R&D tax incentives cut

One of the big surprises in the budget is the cut to the Research and Development Tax Incentive scheme, relative to the cuts in the company tax rate, reducing the rates of refundable and non-refundable offsets by 1.5 percentage points.

The R&D Tax Incentive Scheme is regarded as one of the most utilized options for startups to access government help. Cuts to the scheme, were not flagged as a target for the government in the lead up the budget.

Shoes of Prey founder Michael Fox told Private Media, prior to the announcement, that R&D tax incentives were the one thing keeping his company in Australia, rather than the US.

The cuts are “consistent with the government’s commitment to cut the company tax rate from July 2015,” according to the budget papers.

“The government will preserve the relative value of the Research and Development Tax Incentive by reducing the rates of refundable and non-refundable offsets by 1.5 percentage, effective from July 1.”

“The measure is estimated to provide a gain to the budget of $620 million in fiscal balance terms over the forward estimates period.

“In underlying cash term, the gain to the budget is $550 million over the forward estimates period.”

The reduction means an estimated $70 million per annum not being able to be claimed through R&D tax incentives by Australian companies.