FAQ – R&D Tax Incentive

What sort of businesses can claim the R&D Tax Incentive?

Any business looking to introduce new or improved products, processes, devices, materials or services that have a technical edge or overcome a technical problem may be doing R&D. If that business is funding or creating new knowledge – or expanding existing knowledge – to provide this technical solution, then it is doing R&D. Therefore, this business may be able to claim the R&D Tax Incentive.

The R&D Tax Incentive is specifically designed to assist and encourage companies in sectors including the following:

• Manufacturing
• Building and construction
• Agriculture
• Biomedical
• IT
• Banking and finance
• Mining and minerals processing

Is my company eligible to claim the R&D Tax Incentive?

To be eligible to claim the 43.5% refundable tax offset, your company (or company group) must have an annual turnover of less than $20 million and annual R&D expenditure of at least $20,000. Companies with an annual turnover of more than $20 million and meet the above criteria are eligible for a 38.5% non-refundable tax offset.

In addition, the company must be either:

• incorporated in Australia
• incorporated in another country but be an Australian resident for tax purposes, or
• incorporated in a country with which Australia has a double tax agreement, and undertake R&D activities through a permanent establishment in Australia.

Trusts are generally not eligible – except if they are a public trading trust with a corporation acting as a trustee. Companies that are exempt from tax are also not eligible.

Do I need to register for the R&D Tax Incentive?

Yes, to claim a tax offset under the R&D Tax Incentive program, you must register your R&D activities with AusIndustry within 10 months of the end of the income year in which they were undertaken.

How do I know when an R&D claim has been approved?

Like your income tax, the R&D Tax Incentive is a self-assessment program. As long as your company has lodged its annual registration and can substantiate its eligibility and entitlement, you can claim the tax offset as part of your income tax return. If you require certainty about your eligibility and entitlement, you can apply for an Advance Finding prior to registration.

What’s the minimum R&D spend to be able to claim?

To claim the tax offset, your total R&D spend for the income year must be at least $20,000. There are some minor exceptions to this.

Is there a limit to the amount of benefit I can claim?

A company group can claim up to $100 million of eligible R&D expenditure per annum.

When can expenditure on R&D activities conducted overseas be included in a claim?

To claim expenditure on an activity conducted overseas, you must first obtain an Advance Finding that it is an eligible R&D activity. You must also obtain an Overseas Finding that such expenditure can be included in your claim. The application must be made in the first income year that the overseas activities are conducted.

If you have further questions about the R&D Tax Incentive, please contact MJA.