Innovation comes at a cost. By its very nature, Research and Development (R&D) exists to offset costs typically associated with investigating, designing and testing new products across a range of industries and sectors, and irrespective of size or scale.
In order to foster a more innovative Australia, the Federal Government’s R&D tax credit regime incentivises eligible business owners to allocate funds to experimental activities. It is not only advantageous to the individual businesses, but also drives market competition and positions Australia as an attractive destination for business.
The R&D Tax Incentive can deliver a sizeable reduction in company tax and, in certain circumstances, generate a sizeable tax refund. This allows businesses to grow and maintain cash flow to further innovation.
Administered jointly by the ATO and AusIndustry – a business support organisation – the R&D Tax Incentive is a rules-based entitlement program. Under the program, if an applicant is eligible, they are entitled to the benefit.
To date, many businesses are unaware of the scope and eligibility requirements of the R&D Tax Incentive, including that it applies to R&D activities and expenditure in income years commencing on or after 1 July 2011.
R&D activities and expenditure conducted from 1 July 2021 are eligible for new incentive benefits, including:
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- A refundable tax offset equal to the corporate tax rate of 25% (applicable for income years starting on or after 1 July 2021) plus an 18.5% premium for eligible entities with an aggregated turnover of less than $20 million per annum, making the refund amount 43.5% of eligible R&D spend
- A non-refundable tax offset equal to the corporate tax rate plus a premium based on R&D intensity for eligible entities with an aggregated turnover of $20 million or more per annum. This includes:
- 8.5% premium for eligible entities on R&D intensity of less than 2%
- 16.5% premium for eligible entities on R&D intensity of more than 2%
Importantly, many of the calculations required in applying for an R&D tax credit are not straight-forward. Registrants must delineate between core (experimental) activities and supporting (directly related) activities in R&D projects. They must also conduct a dominant purpose test for supporting activities.
How we help clients
HLB Mann Judd specialists are experienced in navigating the complexities of the R&D Tax Incentive. We assist innovative businesses to manage, prepare and execute applications and deploy a range of approaches to streamline the process.
This is undertaken through a combination of any or all of the following services:
- A free and anonymous online eligibility self-assessment test
- Planning
- Project management and compliance tools
- Annual registration development and lodgement
- R&D tax schedule preparation
- R&D review and audit assistance
- R&D advance finding – providing certainty that your activities are eligible
- Completion of the income tax return, including R&D schedule.
