What is the R&D Tax Incentive?
The Research and Development Tax Incentive (R&DTI) helps you to offset some of the costs you put into eligible R&D. The R&DTI helps out thousands of Australian businesses striving for innovation which benefits the wider Australian economy.
Over 13,000 Australian businesses employ the benefit of R&DTI with the majority going to manufacturing (32%), science/technology (20%) and IT (17%). The stated aims of the scheme:
- boosting competitiveness and improving productivity across the Australian economy;
- encouraging investment in new R&D activity;
- providing a predictable means of obtaining government support for their innovative venture; and
- providing support for smaller and early stage ventures to recoup some of the costs in relation to development activities.
Who Administers the Scheme?
The scheme is administered jointly by AusIndustry and the Australian Taxation Office. AusIndustry oversees the registration of your R&D activities and helps ensure that they comply with legislative framework. The ATO delivers the cash benefit via your company’s tax return and may check if the R&D expenditure you are claiming in your return is eligible.
Getting It Right
You can apply for the R&DTI yourself and we have a Compliance Readiness Checklist to ensure you haven’t missed providing any important information.
However be aware that, just like taxes, there is an Integrity Framework that takes into account risk and behaviourial factors that is used by AusIndustry and the ATO. Registration does not mean eligibility.
If you wish for us to step you through the process and ensure compliance with the Integrity Framework, contact us today for an obligation free consultation.
The R&DTI is a self-assessment program where you self-assess your R&D activities against the eligibility requirements. The legislation which you are to self-assess against is the Industry Research and Development Act 1982, and the Income Tax Assessment Act 1997.
To be eligible for the R&D Tax Incentive you must:
- be a company that is liable to pay income tax in Australia
- conduct at least one activity that meets the definition of a core R&D activity
- have eligible R&D expenditure greater than $20,000
The department may conduct checks that registered activities comply with the law after you have registered. Similarly, the ATO may check if the R&D costs being claimed are eligible after registration.
To claim the R&D tax offset in your annual income tax return, you must first register your R&D activities under the R&DTI. You must register separately for each income year you wish to claim.
The benefit of being registered for the scheme is a 43.5% tax offset where an entity has an aggregate turnover of less then $20 million per annum
These tax offsets reduce your company tax liability dollar for dollar.
The R&D tax offset can also be refundable, so if it exceeds your tax liability you will receive a cash refund of the balance from the ATO.
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