Eligible businesses should be focusing on the preparation and registration of any research and development (R&D) tax incentive claims for the 2012-13 financial year, as the deadline for doing so (April 30, 2014) is fast approaching.
Registration of claims for the R&D tax incentive can take place up to 10 months after the financial year in which the R&D activities took place. R&D activities must meet certain criteria to be eligible for the tax incentive, and must be classified as either core R&D activities or supporting R&D activities (ask this office for more details about what these are and other eligibility criteria).
What does the tax incentive cover?
The R&D tax incentive is a government initiative that provides support via two available tax offsets to help businesses undertake R&D activities. The two components of the program are:
- a 45% refundable tax offset (equivalent to a 15c in the dollar benefit for a company) for eligible entities with an aggregated turnover of less than $20 million per annum, or
- a non-refundable 40% tax offset (equivalent to a 10c in the dollar benefit for a company) for all other eligible entities.
The R&D tax incentive has several business objectives. It aims to:
- boost competitiveness and improve productivity
- encourage the industry to conduct R&D that may not otherwise have occurred
- provide business with more predictable, less complex support, and
- improve the incentive for smaller firms to engage in R&D.
The incentive gives opportunity for businesses to develop:
- new knowledge, and/or
- new or improved products, devices, materials, services and/or processes.
Key eligible amounts that a company can take into account in calculating the offsets are referred to as “notional deductions” and a business must have notional deductions for an income year of at least $20,000 in order to make a claim.
Eligible costs may include:
- operating costs such as salaries, consumables and contractor costs
- plant and equipment, and the decline in value of these assets used for R&D activities
- expenditure incurred to an associate in an earlier income year, but paid in a current year (subject to some restrictions), and
- a partner’s proportion of costs incurred, and relevant balancing adjustments
- The program is available across a broad range of sectors, including agriculture, biotechnology, manufacturing, mining and IT. The tax incentive can
provide generous benefits for eligible R&D activities, and is jointly administered by AusIndustry (on behalf of Innovation Australia) and the Tax Office. Innovation Australia is primarily responsible for administering the technical eligibility and registration of R&D activities.
It is also possible to apply for an “advanced finding” on the work proposed. This can allow for certainty that the activity will be eligible for the offsets, and will lock the Tax Office into accepting the R&D claims for the following two income years. However businesses must lodge an application before the end of the financial year in which the R&D activity is conducted.
See this office for any assistance to make your R&D tax incentive claim.
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