The R&D Tax Incentive is open to all Australian companies irrespective of their turnover or profits / losses. The scheme is most favourable to companies with losses and a turnover of less than $20 million. By complying with the R&D requirements these companies are entitled to a tax free refund of up to 43.5% of their R&D costs each year. This program can also have the benefit of reducing the amount of company tax that would otherwise be payable.
The two core components are:
- a 43.5 per cent tax free cash refund to eligible entities with an aggregate group turnover of less than $20 million pa
- a non-refundable 38.5 per cent tax offset to all other eligible entities.
The scheme allows for up to 50% of the eligible R&D activities to be conducted overseas under some circumstances.
The R&D Tax Incentive scheme offers companies with an aggregate group turnover of less than $20 million with a tax free cash refund of 43.5% of their eligible R&D Tax expenditure. The refund may be reduced if the company has unpaid tax liabilities including GST, FBT and withholding taxes. Where the aggregate group turnover exceeds $20 million the company can access a 38.5% non-refundable credit to reduce the company tax that would otherwise be payable. This initiative may assist your company by providing timely support and increased cashflow when most needed.
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 Pattens at firstname.lastname@example.org
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.
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 where:
- the 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).
Supporting R&D activities are activities directly related to core R&D activities.
Companies must have incurred notional deductions for an income year of at least $20,000 to claim a tax offset.