Provides a tax offset designed to encourage more companies to engage in research and development.
The R&D Tax Incentive has two core components:
The R&D Tax Incentive has two core components:
1. Entities with an aggregate annual turnover of less than $20M- are eligible for a 45% refundable tax offset (equivalent to a 150% deduction), provided they are not controlled by income tax exempt entities.
Example:
2. Entities with an aggregate annual turnover of greater than $20M- are eligible for a nonrefundable 40% tax offset (equivalent to 133% deduction). Unused non-refundable offset amounts may be able to be carried forward to future income years.
Example:
The types of entities eligible for the R&D Tax Incentive are corporations (called ‘R&D entities’) that are:
Generally trusts are not R&D entities. The definition of R&D entities extends to body corporates in the capacity of trustees of public trading trusts, but not to trustees of any other sort of trusts.
R&D activities must meet certain criteria to be eligible and are categorised as either Core R&D activities or Supporting R&D activities.
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:
An activity is eligible as a supporting R&D activity where:
Supporting R&D activities are usually required in order for the core R&D activities to take place. They can occur at a different location or time to the core R&D activities so long as they maintain the required relationship
The key eligible R&D amounts that company can take in account in calculating their offsets are referred to as ‘Notional Deductions’. A company must have notional deductions for an income year of at least $20,000 in order to claim a R&D Tax offset – (this is amount is subject to some exceptions).
Eligible costs incurred on registered R&D activities may include the following amounts:
In certain circumstances R&D activities conducted overseas may be eligible to claim, however it will be necessary to apply to Innovation Australia for approval. The key requirements for approval will be:
Under the R&D Tax Incentive it is possible to apply for an advance finding on the work to be undertaken.
This will allow increased the certainty as to whether Innovation Australia considers the planned R&D activities are eligible under the program. An advance finding by Innovation Australia binds the ATO for the year the application was made, and the next two income years. A company will still need to register their R&D activities annually to claim the R&D Tax Incentive even if they have an advance finding covering those activities. However as long as there has been no change in the work program they can be certain of the eligibility of the claim.
Our associates are registered R&D tax practitioners with over 15 years experience. They have lodged over 700 successful claims for clients and assisted clients with over $75M in taxation benefits. We are the leading provider of R&D claims in the Biotech, IT and Clean Technology industries.
Call us on 03 9005 6789 or email to see how we can assist with your R&D tax incentive claim.