R&D Tax Incentive:
Fact sheet
What does it offer?
The R&D Tax Incentive is the
Australian Government’s principal measure
to encourage industry investment in research
and development. It is a broad-based,
market-driven program that aims to boost
company competitiveness, improve
productivity and deliver economy-wide
benefits to Australia.
The R&D Tax Incentive replaces the
R&D Tax Concession for research and
development in income years commencing
on or after 1 July 2011. It provides generous
benefits for eligible research and development
activities (R&D activities). The two components
of the program are:
a 45 per cent refundable tax offset for eligible
▶
companies with an aggregated turnover of
less than $20 million per annum; or
a non-refundable 40 per cent tax offset for
▶
all other eligible companies.
The R&D Tax Incentive is jointly
administered by AusIndustry (on behalf of
Innovation Australia) and the Australian
Taxation Office (ATO).
Who can apply?
The R&D Tax Incentive is available to:
a company incorporated under an
▶
Australian law;
a company incorporated under a foreign
▶
law that is an Australian resident for tax
purposes; or
a company incorporated under a foreign
▶
law that is a resident of a foreign country
with a double tax agreement with Australia
and who carries on business through a
permanent establishment of the body
corporate in Australia.
Trusts are generally not eligible for tax benefits
under the R&D Tax Incentive. The one
exception is a body corporate acting as trustee
of a public trading trust. If you are in doubt as
to whether you are an eligible entity, please
contact the ATO.
How and when do I apply?
Applications for registration of R&D activities
must be lodged with AusIndustry within
10 months after the end of the company’s
income year in which the activities were
conducted.
The R&D Tax Incentive applies to
R&D activities conducted in income years
commencing on or after 1 July 2011.
Applications for registration may be submitted
from 1 July 2012 for activities conducted in the
preceding income year. Application forms will
be made available on the AusIndustry website
closer to that time.
Eligible activities conducted in income years
that commenced prior to 1 July 2011 may
still be able to be registered under the
R&D Tax Concession.
After registering with AusIndustry, applicants
may claim a tax offset by completing the ATO’s
R&D Tax Incentive Schedule and the relevant
labels in their income tax returns.
What activities are eligible?
Activities are eligible if they meet the definition
of R&D activities. R&D activities are defined as
either ‘core’ or ‘supporting’ R&D activities.
Core R&D 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; and
that are conducted for the purpose of
▶
generating new knowledge (including new
knowledge in the form of new or improved
materials, products, devices, processes or
services).
Certain activities are excluded from being
considered core R&D activities and may only
be considered as supporting R&D activities.
A list of excluded activities can be found in
the R&D Tax Incentive Overview.
Supporting R&D activities are activities
directly related to core R&D activities. However,
if such activities;
▶ produce, or are directly related to producing,
goods or services, or
▶ are listed as an activity excluded from
being a core R&D activity,
they must be undertaken for the dominant
purpose of supporting core R&D activities.
Additional information on how these definitions
may apply to your activities is available on the
AusIndustry website1.
R&D Tax Incentive:
Fact Sheet
What types of expenditure
can I claim a tax offset for?
Subject to eligibility criteria and exclusions, a
company can generally claim a tax offset for:
▶ expenditure incurred on R&D activities;
▶ decline in value of depreciating assets
used in R&D activities;
▶ balancing adjustments for depreciating
assets used only in R&D activities; and
▶ relevant parts of Cooperative Research
Centre (CRC) contributions paid out of
the entity’s own funds not out of
Commonwealth funding.
These are referred to as ‘notional deductions’.
Companies must have incurred notional
deductions for an income year of at least
$20,000 to claim a tax offset. However, this
threshold does not apply to:
▶ expenditure incurred to a Research Service
Provider (RSP), provided the RSP is not
an associate; or
▶ monetary contributions made under
the CRC program.
For more information about claiming a tax
offset, refer to the ATO website.
Where do I go for more information?
For information on registration and eligibility of R&D activities, For information on eligible entities and amounts you can claim
contact AusIndustry
▶ Visit the website | www.ausindustry.gov.au
▶ Call the AusIndustry hotline | 13 28 46
▶ Email the AusIndustry hotline | hotline@ausindustry.gov.au
How do I know if I am eligible? Where can I find
Applicants need to self assess their eligibility further information?
for the R&D Tax Incentive. If you require Further information on the program is available
certainty in relation to your eligibility, you may on the AusIndustry and ATO website in the
wish to seek an advance finding about your R&D Tax Incentive Overview, and in a series
activities from Innovation Australia or a private of information sheets on:
binding ruling from the ATO about your
▶ Registration
offset entitlement.
▶ Eligibility of activities (core and
Some of the issues you need to consider in supporting R&D activities)
self-assessing your entitlement include
▶ Overseas R&D
the following:
▶ Advance Finding
▶ Are you an eligible company?
▶ Core Technology
▶ Are the activities being undertaken
experimental activities? Experiments can
▶ Record keeping and R&D Planning
take place in a range of settings, from a ▶ How do I register as a RSP?
separate laboratory to an otherwise ▶ How do I access a RSP?
normal production line.
▶ Refundable and non-refundable tax offsets
▶ Can the outcome of the experiments be
▶ Expenditure incurred to an ‘associate’
known or determined in advance on the
basis of publicly available knowledge, ▶ Grouping for aggregated turnover purposes
information or experience? You will need ▶ For whom are the R&D activities conducted?
to indicate how you established this
▶ Feedstock adjustments
knowledge gap.
▶ Clawback adjustment
▶ Where are the activities being undertaken?
If they are being undertaken overseas, you
will need to obtain an overseas finding2.
▶ For whom are you conducting the activities?
A company is only entitled to a tax offset
for R&D activities conducted ‘for’ itself.
There are some exceptions to this, where
the activities are conducted for associated
foreign corporations.
▶ Do you have notional deductions of
$20,000 or more? If not, have you
contracted the activities to a registered
RSP, or made a monetary contribution
under the CRC program? 1. See for example the R&D Tax Incentive – Eligibility
of activities (core and supporting R&D activities)
▶ Do you have appropriate records and Information Sheet.
evidence of conducting eligible R&D 2. For more information, refer to the R&D Tax Incentive –
activities to substantiate your claim? Overseas R&D Information Sheet.
contact the ATO
▶ Visit the website | www.ato.gov.au
▶ Call the ATO | 13 28 66
▶ Email the ATO | innovationtax@ato.gov.au