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Research and Development Tax Incentive – lodgement deadline fast approaching

Research and Development Tax Incentive – lodgement deadline fast approaching

Companies that have undertaken Research and Development (“R&D”) activities during the year ended 30 June 2022 are required to register their activities with AusIndustry prior to 30 April 2023. This deadline is strictly enforced by AusIndustry.

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) 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%) 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 2023 is fast approaching.

AusIndustry registration requirement

Companies that have undertaken R&D activities during the year ended 30 June 2022 are required to register their activities with AusIndustry prior to 30 April 2023. 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 2022 year-end would be required to submit their R&D application to AusIndustry by 31 October 2023.

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 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 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.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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