On 26 June 2013 the Assistant Treasurer introduced into the House of Representatives the Tax Laws Amendment (2013 Measures No 4) Bill 2013. The Bill makes amendments which will restrict access to the research and development (R&D) tax incentive for certain companies, enable taxpayers to claim specified refundable tax offsets in quarterly instalments, and ensure that overpaid GST is refundable only in certain circumstances.
The Bill amends the ITAA 1997 to prevent an entity from claiming the R&D tax incentive if its assessable income for an income year, when aggregated with the assessable income of entities it is connected with, entities it is affiliated with and entities affiliated with it, is $20 billion or more. An entity with aggregated assessable income in excess of $20 billion will treat its R&D expenditure in the same way as it treats its other expenditure, for example, as a deduction. This is intended to deny access to the R&D tax incentive for very large entities, which are considered less likely to engage in additional R&D in response to government incentives.
The amendments will apply to R&D entities’ income years starting on or after 1 July 2013. However, in aggregating an R&D entity’s assessable income, an R&D entity should include the assessable income of entities that it is connected or affiliated with, along with entities that it is an affiliate of, for the same income year, even if the corresponding income year for those entities starts before 1 July 2013.
Quarterly R&D credits
The Bill amends the TAA 1953 to enable taxpayers to claim specified refundable tax offsets in quarterly instalments in anticipation of their end of year refund from those offsets. The system initially only applies to the research and development (R&D) refundable tax offset.
An entity that satisfies the threshold tests can apply to participate in the quarterly credits system for one or more quarters in an income year. It can participate for any or all of the refundable tax offsets for which it qualifies and that are eligible to be in the system. Initially, only the R&D tax offset is within the system.
If it does participate, an entity receives a payment each quarter towards its expected end-of-year refund from those tax offsets. It can receive either a “safe harbour” standard amount, based on a previous year’s refund, or it can vary to a different amount that better reflects the refund it expects to receive in the current year.
The GIC applies if an entity varies to an amount that proves to be excessive when the amount of the actual refund is assessed at the end of the year. This is to discourage entities from varying to excessively high amounts. The interest charge does not apply if the entity uses safe harbour standard amounts.
The quarterly payments will be set off against the amount of the actual refund and any excess paid to the entity if the payments were too low, or repaid by the entity if the payments were too high.
The amendments will apply to instalment quarters starting on or after 1 January 2014.
Refunding excess GST
The Bill amends the GST Act, the ITAA 1936 and the TAA 1953 to ensure that excess goods and services tax (GST) is refundable only in certain circumstances. The amendments apply to overpayments of GST as a result of a mischaracterisation of a supply or arrangement or miscalculation of the GST payable, or for any other reason, if the overpaid GST has been passed on.
In most cases, the amendments allow taxpayers to determine whether they are entitled to a refund of amounts of excess GST. The Commissioner also has discretion to refund the excess GST in exceptional circumstances where the application of these provisions to deny a refund would be inappropriate.
The amendments will apply to all refund claims relating to tax periods starting on or after 17 August 2012, for those refund claims lodged on or after 26 June 2013.