News and Research

If you are just in the preliminary stages of a business you may not be acquainted with the Research and Development (R&D) Tax Incentive scheme obtainable from the Australian government. The incentive helps businesses by offsetting some of the costs of performing R&D. Many companies are not aware of what institutes as research and development, consequently missing out on a significant cash injection for their business. We’ve delved into 4 common questions below to provide you with more information on the R&D Tax Incentive:

1. What is the R&D Tax Incentive?

If you’re conducting research in Australia, then the R&D Tax Incentive is one of the most efficient forms of support. Under the scheme, the government provides companies with up to 43.5 cents back for every eligible dollar. The research doesn’t have to involve creating vaccines or launching rockets, but rather, any firm who is developing or improving products, processes, or software may be eligible.

The R&D Tax Incentive currently has two core components:

• 43.5% refundable tax offset for eligible entities with a turnover of less than $20 million per annum provided they are not controlled by income tax exempt entities.
•  Non-refundable 38.5% tax offset for all other eligible entities. Unused non-refundable offset amounts may be able to be carried forward to future income years.

2. Do I need to pay tax or myself a salary to get the incentive?

You don’t need to have paid tax to get the incentive. Several small businesses can receive the benefit in a cash payment.

However, to claim expenditure under the incentive, you must incur the expense in your company accounts. If you are an owner of the business, salary needs to be paid within the year.

3. Can I claim R&D conducted overseas?

Companies may be able to claim overseas activities, but this is usually reserved to aid companies that can demonstrate they could not have conducted the R&D locally.  In addition, the deadline for these applications is different – firms must apply within the same financial year as the activities were undertaken.

4. Is my project eligible to submit an R&D application?

R&D projects typically encompass a set of activities with start and finish dates, commenced to produce a specific piece of new knowledge. Under the R&D Tax Incentive scheme, eligibility is determined on an activity foundation rather than on a project foundation. Eligible activities fall into two classes, core R&D activities and supporting R&D activities, both of which can be claimed.

Want to know more? Contact our R&D tax specialists today to find out if your activities are eligible.