In its current form, the R&D Tax incentive is an easily accessed and significant program that can provide generous benefits to eligible companies. In fact, the refundable (‘cash out’) component of Australia’s R&D incentive is the most generous when compared to other OECD countries around the world.
Indeed, the R&D Tax Incentive is the Federal Government’s largest financial program to encourage companies to innovate. It has a minimum spend of $20,000 and is administered jointly by AusIndustry (on behalf of Innovation Australia) and the ATO. However, time is running out for businesses to register their R&D activities for the 2014-15 tax year. For companies with a June 30 financial year-end, they will need to register their R&D activities before April 30. In light of the impending deadline, we’ve provided a breakdown of how the program’s tax offset works.
Essentially, the program falls into two broad categories:
Regardless of what offset applies, registration is the critical first step in accessing the R&D Tax Incentive. In order to be able to claim the benefits of the R&D Tax Incentive, a company must register their R&D activities with AusIndustry. Eligible R&D activities typically pertain to only R&D activities conducted in Australia. To be eligible for the R&D tax incentive the activities must be classified as either core R&D activities or supporting R&D activities. In brief, core R&D activities are essentially the experimental undertakings conducted to generate new knowledge (The R&D Tax Incentive: Glossary of Frequently Used Terms). It is vital to note that activities must show that they are undertaken for the dominant purpose of supporting R&D activities or generating new knowledge, rather than a commercial or other purpose. To make the process easier, we’ve put together an infographic which indicates the activities that do not qualify for the R&D Tax Incentive. You can download the PDF to print or save here: Examples of Non Core R&D Activities. In a previous blog post, we delved into what is considered ineligible expenses and expenditure.
As noted above, the deadline for lodging an application for registration is ten months after the end of a company’s income year. Thus, for companies with a standard income period of 1 July to 30 June, the lodgement date for registrations with AusIndustry is April 30. Since April 30 falls on a Saturday this year, companies are able to lodge on Monday 2 May 2016.
If you have any further questions, please contact one our R&D tax specialists .