The much anticipated quarterly payments regime is due to commence on 1 January 2014 and will allow an eligible company to receive its refundable tax offset in quarterly instalments based on its anticipated R&D spend. It will generally be available to companies who are entitled to a 45 percent refundable R&D offset, i.e. those with an aggregated turnover of 20 million dollars or less.
However, accessing the quarterly payments will not be as easy as many will have expected. The exposure draft, released on 12 April 2013, includes three qualifying criteria.
The reasonable receipt test is relatively easy to meet as it simply tests the entity as eligible for a refundable tax offset for the relevant income year.
The complying taxpayer test, however, can be extremely onerous. It not only requires the applicant company to comply with its obligations under taxation laws and Part III of the R&D Act for the previous 5 years, but extends this requirement to the company's affiliated and connected entities.
But it is the history test, which is the most restrictive as it requires a company to have made claims under the R&D tax incentive in at least one of the previous 5 income years. This means that many start-up businesses will need to wait a year before they can take advantage of the quarterly credits.
While the quarterly credits will provide invaluable support to those who are eligible, it seems that many companies, when most in need, will be denied this cash flow benefit.