Businesses could lose $590 million in R&D tax breaks under changes before the Senate. What’s the plan?

Detailed summary

Here’s what’s being proposed, and which businesses would be most affected if the changes are passed.

Each year, more than 13,000 Australian companies – half of which are small businesses – claim a tax break for doing research and development work through the “R&D tax incentive”.

That cost the federal budget A$4.3 billion in foregone revenue in 2024–25 alone.

The federal government is now trying to change the tax break to save $590 million by 2030.

That proposal is about to go before the Senate. It’s already passed the lower house of Parliament – though not without criticism.

If it passes, it would be the most significant change to the incentive scheme since it was introduced in 2011.

Here’s what’s being proposed, and which businesses would be most affected if the tax incentive does change.

In this year’s budget, the federal government announced it wants to stop small businesses accessing a generous refundable tax offset once they have been in business for ten years. For firms developing therapeutic goods, the limit is 15 years.

At the same time, the incentive rates would become more generous. Small firms would also be able to access the highest refundable tax offset rate for longer, by lifting the eligibility from companies with turnover of $20 million up to $50 million.

But the overall changes would make it harder for companies to access tax breaks.

Opening of the article, excerpted from The Conversation AU. To read the rest, open the article on the publisher's site.