What is it?
The R&D Tax Incentive applies to R&D activities and expenditure for income years commencing on or after 1 July 2011 and replaces the R&D Tax Concession.
The program provides a targeted tax offset designed to support more companies to invest in R&D activity.
The R&D Tax Incentive has two core components:
- a 45 per cent refundable tax offset (equivalent to a 150 per cent deduction) to eligible entities with an aggregated turnover of less than $20 million per annum
- a non-refundable 40 per cent tax offset (equivalent to 133 per cent deduction) to all other eligible entities.
Who will be eligible to claim the R&D Tax Incentive?
Entities eligible to claim under the R&D Tax Incentive are:
- Australian companies;
- corporations that are Australian residents for tax purposes;
- foreign companies resident in a country with which Australia has a double tax agreement and that carry on R&D activities though a permanent establishment in Australia; and
- public trading trusts with a corporation acting as a trustee.
However, an entity whose entire income is exempt from income tax is not an eligible entity under the R&D Tax Incentive.
What activities will be eligible under the R&D Tax Incentive?
Activities that are eligible for the tax offsets available under the R&D Tax Incentive are defined as either 'core' or 'supporting' R&D activities.
Ai Group will work with the Government over the coming months to ensure that a substantial and ongoing effort to build understanding in industry of these changes occurs and that members have access to relevant and practical information relating to accessing support for research and development activities.
Will there be any help offered in determining eligible activities?
The R&D Tax Incentive allows a company to request an advance finding on whether an activity is eligible R&D or not prior to being able to register the activity. Eligible entities will be able to request that Innovation Australia make a determination as to whether nominated activities satisfy the definitions for core and/or supporting R&D activities. Such a determination by Innovation Australia will bind the Commissioner of Taxation to treat the activity as an eligible R&D activity if it is carried out consistently with the advance finding.
An advance finding is a way for companies to get certainty under the R&D Tax Incentive about the eligibility of activities proposed to be conducted:
- in the income year that they apply for an advance finding; or
- either of the next two income years.
If you would like to provide feedback to Ai Group on any issues relating to the R&D Tax incentive, please email: email@example.com.