Research and Development tax credits
From the 2019/20 tax year, Research and Development (R&D) tax credits are available to Australia and New Zealand businesses undertaking eligible R&D activities.
The tax credit incentives:
- are 15c in the dollar for eligible R&D expenditure
- are available where there has been a minimum R&D spend of $50,000 in an income year (unless R&D is conducted through an approved research provider)
- are capped at $25 million per year for R&D on internal software development
- (software development for an organisation’s internal administration is not eligible)
- are capped at $120 million of R&D per year for the total amount of eligible expenditure
- can be used to reduce tax liability in the current year and refunded up to the amount of employment taxes (pay-as-you-earn, fringe benefit tax and employer superannuation contribution tax)
- can be carried forward if they are non-refundable (subject to shareholder continuity requirements)
replaces the Callaghan Innovation growth grants system (Callaghan Innovation project grants remain available in parallel with the R&D tax credit incentive)
R&D contractors who are paid to perform an R&D activity on behalf of another person are generally ineligible for R&D tax credits.
What is the R&D?
There must be a ‘core R&D activity’ for any credit claim.
- Are you solving matters that involve scientific or technological uncertainty?
- Are you creating new knowledge or improved products or processes as a result?
- Are you using a systematic approach in your work?
Where there is a core activity, expenditure on supporting activities may qualify for the R&D tax credit.
What can be claimed?
Eligible R&D expenditure includes items such as employee salaries, goods and services used in an R&D process, and depreciation loss for assets used in R&D. Overheads (rent, rates, insurance etc) may be eligible expenditures to the extent they relate to qualifying R&D activity.
Primarily, R&D tax credits are only available for expenditure on R&D that occurs in Australia or New Zealand.
Existing R&D loss refund regime
The existing R&D tax loss refund regime which allows to claim refunds of tax losses from the R&D expenses remains in place and can be applied in parallel with the new R&D tax credit incentive.
Our Expertise
Our highly specialised technical and financial consultants can assist you in maximising your R&D tax credit claims.
Quality & Compliance
We combine our tested ‘reverse audit’ methodology with a bespoke approach to every claim and client’sneeds.
Our Mission
Our mission is to uplift your claim and ensure you get the maximum R&D benefit to reinvest in your business.
How can we help?
As part of making an R&D tax credit claim, our tax specialists can assist you with:
Confirming that your entity is eligible to claim R&D tax credits
To be eligible to claim R&D tax credits, your entity must meet various eligibility requirements relating to ownership structure.
Identifying core and supporting R&D activities
Core activities are those which drive the relevant R&D activity and supporting activities are those which have the main purpose of supporting a core activity.
Identifying eligible and ineligible expenditure within core and supporting activities
Various types of R&D expenditure are specifically excluded for the purposes of claiming R&D tax credits.
Complying with record keeping requirements
Contemporaneous records of R&D activities are required to be maintained to claim tax credits.
Applications for pre-approval with Inland Revenue
To improve certainty of eligibility, a pre-approval scheme has been implemented by Inland Revenue.