The research and development (R&D) tax incentive provides a targeted tax offset to encourage certain companies to conduct R&D that benefits Australia. It is a broad-based, market driven program that aims to boost company competitiveness, improve productivity and deliver economy-wide benefits to Australia. It provides benefits for companies performing eligible R&D activities and has the following two core components:
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45% refundable tax offset for eligible entities with an aggregated turnover of less than $20 million unless they are controlled by tax exempt entities.
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40% non-refundable tax offset for all other eligible entities.Â
When do you need to register by?
Applications for registration of R&D activities must be lodged with Aus Industry within 10 months after the end of the company's income year in which the activities were conducted.
That means they must be lodged by 30th April 2015
What activities are eligible?
In general terms, R&D relates to work directed towards the innovation, introduction, and improvement of products and processes (see www.ato.gov.au for more detailed criteria). Activities are eligible if they meet the definition of R&D activities and are defined as either core or supporting R&D activities.
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:
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Expenditure incurred on R&D activities
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Decline in value of depreciating assets used in R&D activities
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Balancing adjustments for depreciating assets used only in R&D activities
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Relevant parts of Cooperative Research Centre (CRC) contributions paid out of the entity 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 either:
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Expenditure incurred to a Research Service Provider (RSP), provided the RSP is not an associate
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Monetary contributions made under the CRC program.
For further information or advice, please contact Sara Crevillen or any of our Business Advisory specialists around Australia