The RD tax incentive program has undergone changes to improve its administration, governance, guidance, and compliance. The Australian National Audit Office has said the Department is generally effective in administering the program. But what are the new changes? Here's a look at what the government's proposed changes will mean for businesses. Hopefully, the changes will make the program even more effective and attractive for small businesses.

Companies in Australia can claim the RD tax incentive as long as their RD activities are supported by the company's core activities. However, they must also provide details on the employees' time spent on the Ramp;D activities. The tax incentive is available for expenditure on RD, so the company should seek professional advice before structuring itself as a company. If the software is not for sale to external customers, the business cannot claim the tax incentive.

The ATO has assessed the risks associated with RD TI since it came into effect. Most of these risks revolve around the refundable tax offset, which is paid even if the company does not receive income. In 2017, the ATO estimated that as much as 10% of the offset could be at risk of abuse. Overall, the risk rating was moderate. Building and construction activities were identified as key areas of concern. ATO is currently seeking to improve transparency and integrity in the Ramp;D tax program.

The RD tax incentive is one of the Australian Government's primary tools for promoting RD. The program is uncapped, demand driven, and uses self-assessments to determine eligibility. The ATO and Industry jointly carry out compliance activities. However, the ATO and the industry are unsure of how effective the compliance arrangements are for the RD tax incentive program.

To qualify for the RD tax offset, an enterprise must have a qualifying amount of RD expenditure. It must have a turnover of $150 million or more. If the company's RD expenditure is more than that amount, the deduction will be limited to 45 percent of the amount of eligible expenditure. The government has outlined the changes for RD tax in its 2018-19 Budget. This incentive is available to companies and researchers who wish to pursue innovative technologies and create products that will improve human life.

To claim an RD tax offset, an RD entity must first register with the IISA. It then provides the ATO with its IISA registration number. The industry also uploads its registration information to a secure extranet site. It can then access the information to perform integrity checks and compliance checks. However, ATO's income tax return processing system does not automatically check whether an entity's registration number is valid.

Despite these changes, the ATO has not updated its website with the information needed to file an RD claim. This is to avoid any confusion in the sector. The new legislative changes will not affect a company's claim for RD until the 2021-22 financial year. In the meantime, there have been two Federal Court rulings on the RD TI. In response, the ATO and IISA have released communication products.