Your business could qualify for Research and Development (R&D) tax incentives and you may not be taking advantage!

The Government continues to implement its R&D tax incentive scheme to encourage companies to engage in R&D activity perceived to benefit Australia.

Your company may be eligible for certain entitlements of which you may be unaware. We can assist you with reviewing the two core components:

  • a refundable tax offset for certain eligible entities whose aggregated turnover is less than $20 million
  • a non-refundable tax offset for all other eligible entities.

The self-assessment programme means you are responsible for determining whether your company is conducting research and development that meets with the eligibility requirements of the programme. This assessment may not be straightforward process to determine your eligibility. We therefore recommend that you discuss it with us, so we can connect you to specialists in the R&D field.

Currently, to qualify for eligibility, your company must be:

  • liable to pay income tax in Australia.
  • able to conduct at least one activity that meets the legislated definition of a core R&D activity.
    - Core R&D activities involve at least one hypothesis guided experiment that is undertaken to generate new knowledge.
    - Other non-experimental activities that directly support a core R&D activity may be eligible as supporting R&D activities.[1]

You may claim for some R&D conducted overseas under certain circumstances.

Australia is currently well behind its international counterparts with our R&D investment, actually reducing spend over the past few years.[2]

This year’s federal budget announcement proposed further changes that will affect the application process of the R&D tax incentive. Larger claimaints (with an aggregated turnover of at least $20 million) will see the net benefit of claims drastically reduce. Smaller claimants, although paying the lower tax rate of 27.5 will also see their benefit decrease from 16 per cent to 13.5 per cent net benefit when in a tax payable position.

These changes will directly impact on our domestic economy, which will in turn affect our competitive standing in the global marketplace.  

However, there are industries that will remain well supported and receive maximum benefits. The medical research field continues to be a focal point for growth with ongoing entitlements.

Positively-speaking, the Government’s tightening of compliance criteria will improve the integrity of claims in general. By redefining a category of tax previously seen as a ‘grey area’, there is better opportunity to qualify due to a greater clarity of requirements. The Government seeks to reward companies who spend more on their R&D, so don’t be deterred by reports on stricter regulation.

If you are contemplating a start-up venture or own a company where you believe you may qualify for the incentive, please contact us to explore your entitlements.

For more information on eligibility, you can also visit business.gov.au/taxincentive

[1] https://www.business.gov.au/assistance/research-and-development-tax-incentive

[2] https://www.theguardian.com/australia-news/2018/jul/10/australias-spending-on-research-plummets-far-below-oecd-average