What is an R&D Tax Incentive Application?
The R&D tax incentive application is a form used to register research and development activities for the R&D tax offset.
What is R&D tax incentive?
The R&D Tax Incentive is the Federal Government’s tax offset aimed at improving productivity and boosting competitiveness across the Australian economy. There are around 13,500 entities registered for R&D activities across various sectors of the economy, including mining, manufacturing and services.
Background
The R&D tax incentive application form is used to apply for registration of research and development (R&D) activities for the R&D Tax Incentive (Section 27A, Industry Research and Development Act 1986).
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Why do you need to register your activities?
R&D tax incentive application is used by AusIndustry for:
- compliance review activities
- identifying R&D industry trends
Who is in charge?
Innovation Australia and AusIndustry are responsible for registration of activities in the R&D tax incentive application and for determining whether activities are eligible.
The ATO is responsible for determining the eligibility of whether you can apply and of expenditure incurred and claimed under the program.
What is the timing?
Completion of the R&D tax incentive application is done on an annual basis.
You have 10 months after the end of your company’s income year in which the R&D activities were conducted.
For most companies this is 30 April the following year.
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Main Sections
The R&D tax incentive application is broken down to separate the key components of a scientific experiment, requesting you to outline:
- Company overview
- Project technical outline
- New knowledge generated
- Unknown outcomes of the project
- Core and supporting activities undertaken
What are you being asked to provide?
In the R&D Tax Incentive application, you are being asked to break down your R&D experiment into two key components:
- Outcome – whether the 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
- Purpose – the R&D is conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).
Now, this may seem heavy for someone new to the method but should be easy to respond to.
In fact, the R&D Tax Incentive Application is broken down into four sections that allow you to respond exactly to this.
How does this apply to each section?
In the second, third and forth sections of the R&D Tax Incentive application, you will need to respond to:
- New knowledge generated – as the legislation outlines, you should be providing examples and information as to how this project will generate new technical knowledge through its completion
- Unknown outcomes – as the legislation outlines, you should be able to provide examples as to why the work must be tested to be proven, i.e. you need to experiment
- Core activities – provide details and outlines of how you tested and proved/disproved your concepts
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Word economy and character restrictions
As with most government applications, each section has a strict limit on the amount of content that can be included.
While many are word limits, the R&D Tax Incentive Application is a character restriction (with spaces).
These scale from 4,000 characters (New Knowledge) to 2,000 characters (Unknown Outcomes).
It’s important to ensure you can succinctly break down your work, as this is your formal, first chance to get it right and avoid a Request for More Information.
Evidence and attachments
The R&D Tax Incentive Application will allow for the inclusion of attachments as a way to further evidence your statements.
It is, in most cases, not worth including additional information.
Your application is assessed on the merit that you can provide simple descriptions of what you are achieving—most times the attachments will not even be viewed.
However, it is advisable to keep this additional information for a technical audit of the project.
What is the review process?
R&D tax incentive applications are reviewed by AusIndustry upon receipt.
They check things like:
- was is it received within the statutory deadline?
- is it complete?
- do the project dates and activities line up?
In most cases AusIndustry accepts the accuracy of the information provided in the application form and registers the activities.
In about 2 weeks you receive your Notice of registration.
The main thing being your Registration Number. It normally a 7-digit code and is preceded by an IR.
This needs to be included in your ATO R&D tax incentive schedule 2022
Is your R&D approved?
Not really. It is a self-assessment process.
You are responsible for ensuring that you your R&D activities and expenditure are eligible.
But, you can always use an R&D Tax Incentive Consultant to assist.
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But I was told my R&D was approved!
Up until a few years ago they used to ‘approve’ it.
AusIndustry used to say:
I am pleased to advise that the delegate of Innovation Australia has approved the registration of the research and development (R&D) activities detailed in the application below. This decision has been made under section 27A of the Industry Research and Development Act 1986
Now they say:
The delegate of Innovation and Science Australia (the Board) has registered the research and development (R&D) activities detailed in the application below for the R&D Tax Incentive. This decision has been made under section 27A of the Industry Research and Development Act 1986 (the IR&D Act).
Will it get reviewed?
AusIndustry will often examine, in detail, activities registered as part of its compliance review.
Generally, 10% of applications are reviewed.
If you are selected for a review, you will get an email and letter.
Contact us if you want to know what 10 questions they will ask.
A registration form can be reviewed up to five years after submission and registration, so hold onto your evidence.
Applying over multiple years
Many R&D projects will span multiple years of development, making them eligible for accessing the rebate, provided they are still conducting eligible R&D activities.
The R&D Tax Incentive Application will allow you to import your previous year’s application content; however, it should be noted that you must include contemporary content in your updated plan.
Project’s need to include tangible development and outcomes with each year to be eligible.
R&D Tax Incentive Consultant
Having worked as an R&D tax incentive consultant for a number of years, I have seen how companies can legitimately increase their R&D tax incentive.
Contact us for assistance with determining your completing your R&D tax incentive application.
Frequently Asked Questions
It’s a formal process where businesses apply to claim tax incentives for their eligible research and development activities.
Businesses, both large and small, undertaking eligible R&D activities within Australia can apply.
Begin by registering your R&D activities with Innovation and Science Australia before lodging a claim with the Australian Taxation Office (ATO).
Typically, businesses have up to 10 months after the end of the income year to submit their application.
You’ll need to detail your R&D activities, associated costs, and demonstrate how they meet eligibility criteria.
The incentive is calculated based on eligible R&D expenditures, with rates varying depending on business size and turnover.
Yes, but you must adjust your claim to account for the other grant amounts.
Processing times vary, but you can generally expect a response within a few months of submission.
You can review the reasons, adjust your application, and resubmit or seek a review of the decision.
Yes, maintaining detailed records of your R&D activities and expenditures is essential for validation and potential audits.
Successful applicants can receive significant tax offsets or refunds, aiding cash flow and reinvestment in further R&D.
Absolutely, startups engaged in eligible R&D activities are encouraged to apply and can greatly benefit.
Consulting with an R&D Tax Incentive specialist or reviewing ATO guidelines can provide clarity on eligibility.
Yes, if you’ve identified errors or missed eligible activities, amendments can usually be made within specific time frames.
While the focus is on Australian activities, certain overseas expenditures might qualify under specific conditions.
You’ll receive formal communication from the ATO or Innovation and Science Australia regarding the outcome.
Eligible costs include R&D staff salaries, contractor expenses, consumables, and some overheads directly related to R&D.
Yes, if you’re undertaking eligible R&D activities annually, you can apply each year.
Ensure you have all records and documentation in place. Engaging with a specialist can help navigate through the audit process.
It encourages businesses to innovate by offsetting some R&D costs, promoting growth, and fostering advancements in Australian industries.
