R&D Tax Incentive

To encourage companies to engage in more research and development activities that will benefit the country, the Australian government provides a tax offset (or rebates) to companies on payable taxes. This tax offset is known as R&D Tax incentive.

In addition to encouraging companies to engage in R&D activities, with the R&D tax incentive, the government also aims to:

  • Enhance productivity and encourage competitiveness to boost Australian economy
  • Offer more predictable and less complex support to companies
  • Push smaller establishments to engage in R&D by improving their incentive

Eligibility criteria for R&D tax incentive

As per the R&D tax incentive legislation, to be eligible for the incentive program, the company must have spent at least $20,000 as national deductions on accounts of R&D expenditure. Along with that, there are certain other eligibility criteria that have to be fulfilled by the entity to be eligible for the tax offset. These criteria are as follows.

  • The entity cannot be an individual or a corporate limited partnership
  • The company should be incorporated under the laws of the land
  • The company can also be incorporated under foreign law, but it has to be a resident of Australia for income purposes
  • The company can also be incorporated under foreign law, but it has to be a resident of a country that is into a double tax agreement with Australia, or carrying on business in Australia by means of permanent establishment as outlined and defined in the double tax agreement.
  • The R&D activities that are to be carried out to be eligible for the tax offset should
  • Have a minimum of one core activity
  • Have multiple supporting activities for every core activity
  • meets the lawful definition of core and supporting activities
  • be based on principles of established science
  • seek an answer for something in technical or scientific field, which is not known to mankind

Process to apply for the tax offset

You can apply for the tax offset in your annual income tax return. However, if you want to apply for the tax offset as per the R&D tax incentive legislation, you will have to have your company registered for the R&D tax incentive. In addition to getting registered for the incentive program, it is also your duty to ensure that

The R&D activities have been carried out in your company complying with the norms as laid down by the R&D tax incentive legislation.

Expenses on R&D activities are only included in the claim as expenditure. Other business expenses shall not be a part of this claim

Your claims are backed by relevant support documents to prove the expenses and activities that has been carried out

Apply for the R&D incentive within deadlines

If there has been a mistake committed by the applicant while filing the income tax return, the law has the provision to amend the same. The amendments are to be made within a certain time limit, which is a couple of years for small business entities and four years for other businesses. The amendment request has to be put up in writing by the applicant.

If you need any advice or assistance regarding the amendments of on the various processes of how to claim the R&D tax incentive, you may want to get in touch with experts such as Femia Accountants who have the expertise and experience to help you with the required information.

Contact our office today on 9316 4500 or book a time to meet with us.