30 April is the deadline for companies to register their eligible R&D activities conducted during the financial year.
Companies registering R&D activities need to provide details of:
- core R&D activities and the corresponding hypothesis for each;
- details of experiments undertaken for each core R&D activity;
- unknown technical outcomes and why knowledge generated from the Core R&D activities is new; and
- eligible supporting activities and how these relate to a corresponding Core R&D activity.
What is the R&D Tax Incentive?
Research & Development (R&D) is key for innovation, as it enables businesses to invest in activities that stimulate growth and bring new products and services to market quicker.
One way that the Australian government encourages organisations pursue R&D is through an incentive program which provides a tax offset for some of a company’s cost of doing eligible R&D activities by reducing a company’s income tax liability. Tax offsets of 43.5% or 38.5% are available for costs incurred on R&D eligible activities depending on a company’s annual aggregated turnover. The 43.5% benefit is a refundable offset.
The ATO has strict criteria regarding what can be claimed as R&D expenditure, so it’s important to contact an experienced R&D advisor who can discuss the incentive with you in more detail.
You are an eligible R&D entity if you are a company that is:
- incorporated under Australian law; or
- incorporated under foreign law but an Australian resident for income purposes; or
- incorporated under foreign law; and
- a resident of a country with which Australia has a double tax agreement, including a definition of ‘permanent establishment', and
- carrying on business in Australia through a permanent establishment as defined in the double tax agreement.
You are not an eligible R&D entity if you are:
- an individual
- a corporate limited partnership
- an exempt entity (where your entire income is exempt from income tax).
Trusts are not generally eligible R&D entities (with the exception of a public trading trust with a corporate trustee).
Where you are conducting your R&D activities?
Generally, only R&D activities conducted in Australia qualify for the R&D tax incentive. However, you may claim for some R&D conducted overseas under certain circumstances.
Eligible R&D activities
Your R&D activities must meet certain criteria to be eligible for the R&D tax incentive.
They must fall into one of the below activities:
- *Core R&D activities involve at least one hypothesis guided experiment that is undertaken to generate new knowledge.
- **Other non-experimental activities that directly support a core R&D activity may be eligible as supporting R&D activities.
Core R&D activities are experimental activities:
- whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that
- is based on principles of established science; and
- proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions
- that are conducted for the purpose of generating new knowledge (including about creating new knowledge or improved materials, products, devices, processes or services).
Supporting R&D activities:
A supporting activity is one that is directly related to core R&D activities or, for certain activities, has been undertaken for the dominant purpose of supporting core R&D activities. Activities that must satisfy the dominant purpose requirement are those that produce – or are directly related to producing – goods or services; or are excluded from being core R&D activities.
Don’t miss out on the opportunity to make an R&D claim.
If you think you could be eligible, chat to us. We're happy to provide you with a complimentary and obligation free assessment of your circumstances.