R&D Tax Incentive
The R&D Tax Incentive is an Australian Government initiative designed to encourage innovation in Australia, by providing financial assistance in the form of tax offsets to companies who engage in eligible research and development activities. It is jointly administered by AusIndustry (on behalf of Innovation Australia) and the ATO.
Are you eligible?
A simple question with a not so simple answer! The eligibility criteria is complex and an interview process with our R&D team is the best way to sort through the jargon. An hour of your time will allow us to do an initial analysis of your company’s investment into new areas of innovation and business growth. Often companies are not aware that their funded process improvements or software development may be eligible for the R&D tax incentive. That’s why a meet and greet with us is an excellent opportunity to find out what is covered under the scheme and how you can benefit.
Who can claim Research & Development incentive?
If you are an Australian company for income tax purposes, are generating new knowledge through the development of new or improved materials, products, processes or services, and are spending greater than $20,000 on eligible research & development expenditure you could be eligible.
Does your project / Business qualify ?
The best way to assess your eligibility is to meet with us as the definition and scope of eligible activities is both large and diverse. Eligible business investments can include improvements and/or developments in products and processes to improve performance, useability and efficiency and better service external clients.
Often companies are not aware that their funded process improvements or software development activities may be eligible for the R&D tax incentive. Improvements to your company’s environmental footprint may also be considered.
Also included are projects across every day industries which offer a wide range of products and services such as Information & Communication Technology, Manufacturing, Biotechnology, Consumer Products, and Agriculture.
Example of eligible Projects
Examples of research and development projects could include:
- A new application that is able to predict the interests of event attendees based on GPS movement tracking technology and suggest networking meetings based on these interests.
- New headphones that are able to significantly improve sound isolation and provide a greater frequency range for quality and clarity of sound.
- New technology and processes used in automobile part manufacturing that are able to significantly reduce costs and improve energy efficiency without compromising performance.
- A new roofing material and design that is able to withstand extreme weather conditions and provide better insulation.An eCommerce website solution that provides the end user with a unique buying capability that simplifies the item selection and payment processing methods currently used.
R&D premium example for a larger company
- A company with a 30 per cent tax rate that has $120 million of R&D expenditure for the year and $300 million of total expenditure will have an overall R&D intensity of 40 per cent. It claims R&D tax offsets at a rate of 34 per cent for the first $6 million of R&D expenditure, 36.5 per cent for the next $9 million of R&D expenditure, 39 per cent for the next $15 million of R&D expenditure and 42.5 per cent for the final $90 million of its R&D expenditure. It also benefits from the increased $150 million R&D expenditure threshold as it can claim concessional R&D tax offsets for its R&D expenditure that exceeds $100 million, rather than claiming these offsets at the company tax rate.
How much can I claim under R&D incentive ?
|R&D Tax offset||Rate of offset|
|Refundable R&D Tax offset(companies with aggregated annual turnover less than $20 million)||The claimant’s tax rate for the year plus 13.5 percentage points.|
|Non-refundable R&D Tax offset(companies with aggregated annual turnover of $20 million or more)||The claimant’s tax rate for the year, plus:|
What does this R&D Incentive mean to you?
Q: My company has an aggregated turnover of $20 million or less & is in a tax loss position.
A:: The claimant’s tax rate for the year plus 13.5 percentage points- R&D as a cash refund
Q: My company has an aggregated turnover of $20 million or less & is in a tax profit position
A:: 13.5% of every dollar spent on R&D will be credited against any tax liabilities.
Q: My company has an aggregated turnover of $20 million or greater and is in a tax profit or tax loss position
A:: he claimant’s tax rate for the year, plus:
- 4 percentage points for R&D expenditure between 0 per cent and 2 per cent R&D intensity (inclusive);
- 6.5 percentage points for R&D expenditure above 2 per cent to 5 per cent R&D intensity (i.e. not including R&D expenditure falling within the first 2 per cent of the claimant’s total expenses for the year);
- 9 percentage points for R&D expenditure above 5 per cent to 10 per cent R&D intensity (i.e. not including R&D expenditure falling within the first 5 per cent of the claimant’s total expenses for the year); and
- 12.5 percentage points for R&D expenditure above 10 per cent R&D intensity (i.e. not including R&D expenditure falling within the first 10 per cent of the claimant’s total expenses for the year).
Applications for Advance and Overseas Findings?
Are you doing most of your R&D in Australia, but doing some activities overseas because they can’t be completed in Australia? You may be able to claim an offset for your overseas expenditure if you obtain an Overseas Finding.
Overseas Findings applications must be submitted before the end of the first income year in which you started the overseas R&D activities.