Has your company undertaken experimental activities directed towards the creation or improvement of materials, products or processes where the outcome of those activities is not known?
If so, your company may be eligible for either a 38.5% refundable tax offset or a 43.5% non-refundable tax offset on 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 2021 is fast approaching.
AusIndustry registration requirement
Companies that undertook R&D activities during the year ended 30 June 2020 are required to register their activities with AusIndustry prior to 30 April 2021. This deadline is strictly enforced by AusIndustry.
For companies that have a substituted accounting period, the relevant lodgement date will be 10 months after year-end. For example, a company with a 31 December 2020 year-end would be required to submit their R&D application with AusIndustry by 31 October 2021.
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.
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.
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 calculation of quantum of 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 to discuss their eligibility for the R&D Tax Incentive.