Confused or overwhelmed by usual budget breakdown? Want an easy to digest and somewhat enjoyable summary of the key points relevant to you? Well, you’ve come to the right place.
Like many others, we think that the usual minutiae of legislative detail summarised by leading economists or industry insiders does not make for great (insert ‘fun’, ‘enjoyable’ ‘entertaining’) reading. But it doesn’t mean we’re not interested - as it has a direct impact to our personal and professional lives.
The team at Nifty Grants have created a FY19 Federal Budget overview with a difference.
Digest the updates to the R&D Tax Incentive and other small medium business related details, sans politician and economist jargon, plus with a salt-bae sprinkle of emojis below! 😃
Here’s what went down last night - and what it could mean for you:
New Fixed R&D Benefit Rates
Not an ideal outcome - because we’ll soon see the refundable offset pegged at 13.5% above the corporate tax rate, a return to the R&D Tax Concession thinking.
This is lower than most startups or small businesses would have expected to be enjoying (with benefits up to 16% above the small company rate of 27.5%).
We're yet to see whether the feedstock and grant clawback adjustments will also be amended, so there may still be a little margin there.
The ultimate outcomes of this means that cash refunds will reduce to 41% from 43.5% for R&D activities for the coming FY (from 1 July 2018 onwards).
Maximum Refundable Claim Caps
If your company falls in the $20m or less turnover bracket, you’ll now be subjected to a new refund cap of $4m in any one claim year.
If you want to claim more than that $4m cap, you’ll be served a non-refundable tax offset (which conveniently can be carried forward into future income years).
Good news if you’re in the medical industry - clinical trials 💊🔬 will be exempt from the cap.
Whilst we'd love to see Nifty Grants users reach those dizzy heights, our analysis shows that most claimants have a fair way to go before these restrictions kick in, so it will have a minimal impact to Nifty users.
More Powers Granted to AusIndustry
AusIndustry has been granted the power to make public findings and to issue binding guidance, so although this may limit the ability to discuss a disagreement, the outcomes will be more resolute and will form accessible precedents.
The regulators will also be responsible for publishing names and details of claimants and expenditure totals to give visibility of all the R&D claims.
Corporate Tax Rate
Company tax rates won’t be increasing (phew). The company tax rate of 27.5% has been confirmed to apply to all businesses with a turnover of less than $25m, up from $10m, for the 2018 financial year. Whilst, for the 2019 financial year, the turnover threshold for the 27.5% company tax rate will increase to $50m.
Immediate Asset Write-Off
Thinking about a capital investment for your business? 🏫 🚐 Your investment decision may be a little easier given the $20k instant asset write-off has been extended for the coming financial year.
Commit to buying an item up to $20k, install and have the item ready for use before 30 June 2019 and you’ll get an immediate deduction. HOWEVER there’s no double dipping when it comes to R&D. Be aware that if you use the instant asset write-off for an item which supports R&D activity, the decline in value will no longer be classed as an eligible R&D expense.
New Goals for the R&D Tax Incentive
As a Nifty Grants customer, the overarching updates and key goals of the R&D Tax Incentive are...
That it will no longer be taken advantage of - more rigour and flex will be granted to AusIndustry to ensure less non-compliance 🙅🏻
Confusing claim criteria will be reduced with the introduction of plain and simple instructions for claiming 📒
Encouragement to spend a higher proportion expenses on R&D activity 🕵🏾
The introduction of the Consumer Data Right (CDR) legislation grant consumers with more control over their data and how it’s shared. Initially rolled out in the banking section, fintechs can expect simplified sharing of consumer data between institutions, supporting the Open Banking initiative.
For Specific Industries..
Good news for those Nifty customers producing craft/specialist beer - Morrison has axed the 40% tax on smaller kegs of beer allowing smaller players to be more competitive. Cheers to that. 🍻
Are you a FinTech startup? Get more links and opportunities for growth internationally off the back off the brand spanking new UK-Australia FinTech Bridge. There’s also a commitment of additional funding to support Australia as a global FinTech leader 💸
Mmmmore regulation in AI 🤖 If you’re working in the artificial intelligence and machine learning space, you can expect to see a new national Ethics Framework and Standards Framework to guide growing capability. Plus, almost $30m in funding has been committed to building capabilities in this space.
The Overall Feels...
It really is a mixed bag for SMEs in the R&D Tax space. Rates are down, lessening potential benefits but the small business community has been saved some of the more aggressive changes that will affect larger claimants.
If you have a question about the above or what to understand the implications for your individual situation, get in touch.
Image by Fabian Blank on Unsplash.