What is it?

The R&D Tax Incentive (R&DTI) is a self-assessed Australian Government assistance program aimed at encouraging companies to undertake R&D in Australia that might otherwise have been considered too risky to do without the financial support provided by the program.

The R&DTI is jointly administered by AusIndustry and by the Australian Taxation Office (ATO). AusIndustry is responsible for the applicant’s technical compliance. The ATO is responsible for financial and taxation compliance.

The R&D Tax Incentive is an entitlement, not a grant. You need to spend the money on the (eligible) R&D activities first and then claim a percentage of that expenditure back later (after the end of the financial year) as a tax refund or tax credit as part of your company tax return.

Who can claim?

The R&D Tax Incentive is open to Australian incorporated companies and some internationally incorporated companies that satisfy certain criteria.

If your aggregated turnover is less than $20M – you can claim 43.5% of eligible R&D expenditure, which is paid as a tax credit or tax refund depending upon your tax liability. If your aggregated turnover is equal to or more than $20M – 38.5% of eligible R&D expenditure, paid as a tax credit only – up to a maximum of $100m (to be increased to $150m).

You need to spend $20,000 on eligible R&D activities to access the R&DTI program.

How to apply

Applying for the R&D Tax Incentive is a two-stage process:

  • You register your R&D activities with AusIndustry, who will assess your R&D activities eligibility from a technical perspective.
  • Once you have received a registration number from AusIndustry, you may submit a separate R&D Tax Schedule to the Australia Taxation Office as part of your company tax return to claim your tax refund or tax credit.

You must register your R&D with AusIndustry by April 30 the following year, but you don’t need final account for this. You will need final accounts for the ATO R&D Tax Schedule (and for your company tax return obviously).

You can claim R&D activities where you need to conduct an experiment in order to generate knowledge to solve a problem – the knowledge cannot be already known to you or be accessible in the public domain.

You need to document your R&D activities at the time you do the R&D. AusIndustry has particular expectations for this documentation, so you need to research this. You may need to substantiate your claimed R&D using this documentation if asked by AusIndustry.

The R&D Tax Incentive is a valuable source of funding for R&D, and is not difficult to access, but you do need a specialist in the R&D Tax Incentive program to help you prepare and submit a fully compliant application.

Contributor: Ian Combes from TechAbstract.

Please contact us at info@bdwelsh.com for more information on the R&D Tax Incentives.