Provides a tax offset designed to encourage more companies to engage in research and development.
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The R&D Tax Incentive provides eligible entities with a tax offset for expenditure on eligible R&D activities and for the decline in value of depreciating assets used for eligible R&D activities. The R&D Tax Incentive replaces the existing R&D Tax Concession for income years commencing on or after 1 July 2011.
The R&D Tax Incentive has two core components:
- a 45 per cent refundable tax offset (equivalent to a 150 per cent deduction) to eligible entities with an aggregated turnover of less than $20 million per annum
- a non-refundable 40 per cent tax offset (equivalent to 133 per cent deduction) to all other eligible entities.
The objectives of the R&D Tax Incentive program are to provide a tax offset to make eligible companies more competitive and improve productivity across the Australian economy by:
- Encouraging industry to conduct R&D that may not otherwise have been conducted.
- Providing business with more predictable, less complex support.
- Improving the incentive for smaller firms to engage in R&D.
R&D activities must meet certain criteria to be eligible and are categorised as either Core R&D activities or Supporting R&D activities.
Core 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:
- is based on principles of established science; and
- proceeds from hypothesis to experiment, observation and evaluation, and leads to logical
- conclusions; andthat are conducted for the purpose of generating new knowledge (including new knowledge in the form of improved materials, products, devices, processes or services).
Supporting R&D activities
An activity is eligible as a supporting R&D activity where:
- it is directly related to a core R&D activity ( for an activity to be ‘directly related’, the activity needs to have a direct, close and relatively immediate relationship with the core R&D activities); or
- for certain activities, it has been undertaken for the dominant purpose of supporting core R&D activities.
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
Eligible R&D Costs
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:
- Operating costs such as salaries, contractors and consumables;
- Plant & Equipment – depreciation costs relating to the decline in value of depreciating assets used for R&D activities;
- Balancing adjustments for depreciating assets used only for R&D activities;
- Expenditure incurred to an associate in an earlier income year, but paid in the current year (subject to restrictions);
- A partner’s proportion of expenditure incurred by a R&D partnership on eligible, registered R&D activities, and the decline in value of, and balancing adjustments for, R&D partnership assets; and
- Monetary contributions made under the Cooperative Research Centre (CRC) program.
Bulletpoint can assist you to prepare your R&D claim and maximise the benefit you receive. We are registered tax agents.
Call us on (03) 9005 6789 or email to see how we can assist with your R&D tax incentive claim.
The R&D Tax Incentive Application Form for Registration of R&D Activities is now available. This form should be used to apply for registration of research and development (R&D) activities for the R&D Tax Incentive.
The Application for an Advance or Overseas Finding Form for the R&D Tax Incentive has been updated. Updated Application Notes for the Advance and Overseas Finding form are also available.
The Application for Registration of R&D Activities Form for the R&D Tax Incentive has been updated to include pre-fill functionality.
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No responsibility is taken for the accuracy of the information presented above. Potential applicants should view source websites for the lastest program information.