From 1 July 2021, the primary benefit for organisations is a tax offset equal to 18% plus the company tax rate (making for 43.5% for most SMEs). This applies where an entity has an aggregate turnover of less than $20 million per annum, (unless controlled by tax exempt entities).
These tax offsets reduce your company’s tax liability dollar for dollar.
The R&D tax offset can also be refundable, so if it exceeds your tax liability you will receive a cash refund of the balance from the ATO.
How the R&D Tax Incentive helps with ESIC
The ESIC (early stage innovation company) tax offset is a generous tax incentive to support investors of early stage innovation companies. To demonstrate the company is an ‘innovation company’ you can apply the 100 point test. In this instance, a sufficiently sized R&D Tax claim in the prior year can provide a company with either 50 or 75 points for this test. So in addition to receiving direct government support, the R&D Tax Incentive may also make it more likely for an innovation company to receive the ESIC status as well.