If you are a company developing a new product, service or process in Australia, you may be eligible for a tax offset under the Research and Development (R&D) Tax Incentive.
The program is jointly administered by the Australian Taxation Office (ATO) and AusIndustry (on behalf of Innovation Australia) and has been designed to boost competitiveness and improve productivity across the Australian economy through supporting innovation.
Eligible businesses can claim a tax offset for costs related to innovation – and because it is an entitlement program, you don’t have to compete with others for funds, you need only meet the criteria to qualify.
You may be an eligible R&D entity if you are any of the following:
- A company incorporated under an Australian law;
- An overseas company but an Australian resident for income tax purposes;
- An overseas company incorporated under a foreign law and you are both:
- a resident of a country with which Australia has a double tax agreement that includes a definition of ‘permanent establishment’;
- and carrying on business in Australia through a permanent establishment as defined in the double tax agreement.
In addition – to be an R&D entity you must also be carrying on eligible R&D activities (see below). If this is you, you can claim eligible R&D expenditure, which covers a range of expenses, or ‘notional deductions’, that have occurred in the relevant financial year and that are directly connected to the R&D activity. Here are some examples of the types of R&D costs that can be eligible expenditure:
- R&D staff salaries, including on-costs;
- Contractors and consultants engaged to assist in R&D activities;
- Overhead costs where related to R&D (rent, electricity etc);
- Plant leasing costs where related to R&D;
- Materials and consumables directly used for R&D;
- R&D ‘pretotyping’ and prototyping trial costs;
- Travel costs for R&D purposes;
- R&D project management, administration and support costs; and
- Monetary contributions under the CRC program.
If you are an eligible business – and conducted R&D during the past financial year – the deadline for application is 30 April. Get the most out of the tax incentive and increase your cash flow.