Canadian businesses are now eligible to claim a 43.5% cash rebate for R&D costs incurred in Australia
The 43.5 cent ‘cash back’ benefit is now available to some companies incorporated in the United States and Canada and who undertake R&D in Australia.
Who is eligible?
Canadian entities may be eligible where they have setup:
- an Australian resident company;
- a corporation that is an Australian resident for taxation purposes; or
- a permanent establishment in Australia.
What’s it worth?
The following table provides a more specific overview:
||All companies in group collectively have a turnover less than AU$20 Million
||Australian Company is in Tax Loss
||43.5 cents in the dollar refund
An Australian subsidiary company, may be eligible for the R&D tax incentive, where:
- the Australian company is wholly owned by its Canadian parent company and qualifies as an R&D entity;
- The Canadian Company controls the Australian Resident Company;
- The Canadian Company, the Australian Company, and any other companies that the two companies are associated with, have a collective aggregated turnover of less that AU$20 million;
- Under an agreement, The Canadian Company agrees to undertake R&D activities in its Australian office solely for the benefit of the Australian Company;
- In the agreement, the Australian Company does not own any Intellectual Property (I.P) generated out of the Canadian Company, but is legally entitled to all I.P. arising from the R&D activities;
- The Australian Company incurs $100,000 in R&D expenditure for the 2017 Financial Year;
- The consideration between the Australian and Canadian companies is at arm’s length and will be paid even if the R&D is not successful.
|Australian Subsidiary Company’s R&D expenditure
|Australian Subsidiary Company’s R&D Tax Incentive Benefit
||$43,500 Cash Refund
Requirements for setting up an Australian Company
Foreign companies will need to set up an Australian company, and expect the following:
- Costs to setup the company to not exceed AU$1,500 (plus GST) to incorporate an eligible Australian entity in order to claim the R&D Tax incentive.
- Company incorporation within Australia can take between 2-3 days.
- Foreign entities will require the availability of an Australian resident director
- The Australian Financial year runs from 1 July to the 30 June, however foreign entities can submit an application to the ATO for a substitute financial year to align with their parent company’s timeframes.
How do I claim my expenditure?
- Eligible Australian subsidiaries will need to register their activities with AusIndustry not later than 10 months after the Australian company’s year end.
- R&D expenditure is claimed through the lodgement of an R&D Tax Incentive claim as part of their annual income tax return.
If you have a Canadian entity and are interested in claiming the R&D Tax Incentive in Australia, contact us to determine your eligibility and discuss your options.
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