January 17th, 2022
In July 2020, The ATO released TD 2020/D1: Income tax: notional deductions for research and development activities subsidised by JobKeeper payments.
The ruling outlined the need for companies that are subject to both the R&D Tax Incentive and JobKeeper to adjust R&D claims on the basis that:
- The “at-risk” rule applies to R&D salaries reimbursed by Jobkeeper, and a company cannot notionally deduct the portion of wage expenditure incurred on R&D activities that has been subject to the JobKeeper payment;
- R&D expenditure incurred on R&D activities that cannot be notionally deducted does not give rise to a tax offset under section 355-100. Therefore, for the portion of JobKeeper payments received that trigger the at-risk rule, no extra income tax is payable under the R&D clawback rules.
Since this draft ruling was released, Swanson Reed had been advising companies to adjust their R&D claims accordingly to exclude from R&D expenditure salaries reimbursed by JobKeeper.
On 22 December 2021, the ATO released finalised TD 2021/9 – Income tax: JobKeeper payments received or expected as a result of research and development expenditure.
Key Extracts from the finalised ruling include the following:
- 24. If you paid wages to an eligible employee undertaking eligible R&D activities, the JobKeeper payment is consideration received as a direct or indirect result of the R&D expenditure incurred.
- 25. JobKeeper payments under Division 2 of the CERP Rules are receivable regardless of the results of any R&D activities on which the wage (or other) expenditure is incurred. There are no eligibility criteria that would link the receipt of JobKeeper payments in any way to the results of the R&D activities that you may be conducting.
- 26. Therefore, to the extent you received the JobKeeper payment for your paid employees, you are not at risk for the wage expenditure and cannot get a notional deduction.
R&D entities who received JobKeeper should ensure they are aware of the finalised ruling and include the relevant adjustments.