Research and Development (“R&D”) Tax Incentive – lodgement deadline fast approaching
Companies that have undertaken R&D activities during the year ended 30 June 2023 are required to register their activities with AusIndustry prior to 30 April 2024. This deadline is strictly enforced by AusIndustry.
The R&D Tax Incentive is a broad-based tax incentive that is available to all industry sectors. A company with R&D activities may be eligible for either a refundable tax offset (equal to the entity’s tax rate plus a 18.5% premium) for entities with an aggregated turnover of less than $20m per year or a non-refundable tax offset (equal to the entity’s tax rate plus a two-tier premium of either 8.5% or 16.5%) for all other eligible entities based on its qualifying R&D expenditure. If you believe your company qualifies, you may need to act quickly to ensure that you do not miss out on potentially significant tax benefits as the registration deadline of 30 April 2024 is fast approaching.
AusIndustry registration requirement
Companies that have undertaken R&D activities during the year ended 30 June 2023 are required to register their activities with AusIndustry prior to 30 April 2024. This deadline is strictly enforced by AusIndustry.
- For companies that have a substituted accounting period, the relevant lodgement date is 10 months after year-end. For example, a company with a 31 December 2023 year-end would be required to submit their R&D application to AusIndustry by 31 October 2024.
R&D Tax incentive eligibility requirements
- To be eligible to claim the R&D Tax Incentive, your company must undertake either core R&D activities or supporting R&D activities. Broadly, core R&D activities are those experimental activities which are required to be carried out with the objective of generating new information in the form of new or improved materials, products or processes. Supporting activities are those activities that are directly related to core R&D activities.
- Eligible expenditure
- The R&D Tax Incentive is available in respect of eligible expenditure incurred on registered R&D activities. Eligible expenditure is expenditure that has been necessarily incurred to enable the R&D activities to be performed and can include:
- Salary and wages of employees directly involved in R&D activities;
- Contracted expenditure;
- Decline in value of assets utilised to perform the R&D activities; and
- Other expenditure including overheads (rent, electricity), or materials consumed during the experimentation process.
Without an advance finding from AusIndustry, the R&D expenditure must generally be incurred in Australia. R&D entities are currently able to include, as part of the R&D Tax Incentive, temporary full expensing deductions in respect of assets used (fully or partially) to conduct registered R&D activities. This interaction provides an additional benefit to R&D entities that have acquired eligible assets during the year ended 30 June 2023 for use in R&D activities.
Documentation requirements
Companies are required to maintain contemporaneous documentation that substantiates the prescriptive and technical requirements of AusIndustry as well as satisfying the Australian Taxation Office as to the nature and quantum of the expenditure.
What are the next steps?
Pitcher Partners is able to assist clients in determining their R&D eligibility, preparing and lodging a R&D application with AusIndustry, identifying eligible expenditure, including calculating the quantum of the R&D Tax Incentive and reviewing documentation to determine whether it satisfies the requirements of both R&D Regulators (AusIndustry and the Australian Taxation Office). Clients should contact their Pitcher Partners representative or contact Maria Paradisis on (03) 8612 9100 or [email protected] to discuss their eligibility for the R&D Tax Incentive.
