Reading time: 4 minutes

The Research and Development Tax Incentive is an entitlement program, aimed at helping businesses offset some of the costs involved in research and development (R & D). The program is targeted, generous and open to businesses of all sizes and in all industry sectors who are conducting eligible R & D activities.  

Who is Eligible?

Under the R & D Tax Incentive, you must determine whether your company is eligible to register activities and claim R & D tax offsets in any given year. Generally your eligibility to claim R & D tax offsets will depend on whether:

  • You are an eligible R & D entity;
  • You have engaged in eligible activities; and
  • You can identify eligible deductions.

You tax advisor will be able to assist you in determining whether you are eligible.

What is an Eligible R & D Entity?

To be classified as an eligible R & D entity you must be a corporation that is:

  • Incorporated under Australian law; or
  • Incorporated under foreign law but an Australian resident for income purposes; or
  • Incorporated under foreign law and (i) a resident of a country with which Australia has a double tax treaty and (ii) carrying on business in Australia through a permanent establishment (as defined in the double tax treaty).

You will not be eligible for the R & D Tax Incentive if you are a corporate limited partnership or if you are an exempt entity (because your entire income is exempt from income tax). You tax advisor will be able to assist you in determining whether you are an eligible R & D entity.

What is an Eligible R & D Activity?

You must assess yourself whether your company’s activities are eligible R & D activities. Eligible activities must satisfy the definition of core R & D activities, and others may be considered support. Visit www.business.gov.au for more detailed information. Again, we would recommend that your speak with your tax advisor when determining whether your company’s activities qualify.

Eligible Deductions

The ATO’s website contains detailed information relating to eligible notional deductions. It also has a research and development tax incentive calculator to help you calculate your R & D tax offset claim.

Registration Deadline

A company must register its R & D activities with AusIndustry before it can access the tax incentive. The deadline for lodging an application for registration is ten months after the end of a company’s financial year.

Threshold Registration Administrative Arrangements

From 1 July 2014, a $100 million threshold applied to the R & D expenditure for which companies can claim a concessional tax offset under the R & D Tax Incentive. For any R & D spending above this threshold, companies can still claim a tax offset at the company tax rate.

AusIndustry has developed guidelines to inform companies of the administrative arrangements that will apply to relevant registrations, including information on what to do if a company registers $100 million of activities but either,

  • Innovation Australia determines that registered activities are not eligible R & D activities; or 
  • The ATO determines that expenditure on registered activities does not qualify for R & D expenditure.

Review

The Australian government in their Tax White Paper announced its intention to examine support for R & D, including the R & D Tax Incentive. The review will look at the programme’s effectiveness and also assess whether it is reaching its proposed objectives.  In parallel with the Tax White Paper, the Centre for International Economics has been engaged to provide independent advice on the review of the R & D Tax Incentive.

In Short

The Australian government has a variety of incentives in place to assist companies with innovation. For more information about the R & D Tax Incentive or any other government grants your company may be eligible for, ask LegalVision’s taxation lawyers on 1300 544 755 or fill out the form on this page.

Webinars

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer