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The R&D Tax Incentive is a business assistance program administered by the Australian Government to encourage and support businesses to undertake R&D activities that they may not otherwise be willing to attempt.
For income years commencing on or after 1 July 2021, the R&D Tax Incentive provides the following tax offset:
- R&D entities with aggregated turnover of less than $20 million are entitled to a refundable tax offset that is fixed at 18.5 percentage points above the company’s tax rate. If the tax offset exceeds the entity’s tax liability, the balance is paid to the entity in cash.
- For R&D entities with aggregated turnover of at least $20 million, the non-refundable tax offset will be set at the company’s tax rate plus 8.5 percentage points for R&D expenditure between 0 and 2% R&D intensity, and 16.5 percentage points for the portion of R&D expenditure above 2% R&D intensity. R&D intensity is the portion of the company’s total expenditure that is identified as being R&D expenditure.
The benefit is accompanied by a rigorous regulatory regime, with review and audit activity undertaken by the ATO and AusIndustry. Claimants need to focus on thorough eligibility assessment and substantiation of claims - PwC has an established methodology created specifically for this purpose.
We advise clients from nimble start-ups to established private businesses to iconic multi-nationals, and everything in between. In addition to supporting our clients with all aspects of claim compliance and preparation, we assist with reviews and audits associated with R&D Tax Incentive claims.
Learn more about your industry:
Agriculture
Have you thought about how the following could affect your R&D claim?
- Separating costs incurred on R&D activities from ordinary farming activities
- The implications of the agriculture R&D taxpayer alert
- The R&D eligibility impact if your R&D is directly or indirectly related to producing goods.
Do you have contemporaneous records to substantiate your R&D activities and expenditure?
Biotechnology, medtech and life sciences
Have you thought about how the following could affect your R&D claim?
- Where are clinical trials undertaken?
- Is your research “foreign-owned” - do you meet all the eligibility criteria?
- Do you need an Advance/Overseas Finding - do you meet all the eligibility criteria?
- Who conducts your clinical trials and other research activities?
- Are all activities conducted “for” the correct entity?
- Did you receive any government grants? Do you know how this may affect your R&D claim?
Do you have contemporaneous records to substantiate all aspects of your R&D claim, including the expenditure and the R&D entity?
Engineering and Manufacturing
Have you thought about how the following affects your claim?
- How do you distinguish between core R&D activities and routine engineering?
- How do you identify when R&D stops during a production trial?
- Did you produce prototypes during your research activities and have you considered how feedstock adjustments may affect your claim?
- Is your R&D directly or indirectly related to producing goods or services? Do you know how the “dominant purpose” test could affect your R&D eligibility?
Do you have contemporaneous records to substantiate your R&D activities and expenditure?
IT and Software Development
Have you thought about how the following affects your R&D claim?
- How do you distinguish between routine software development activities and R&D activities? Have you considered the software R&D taxpayer alert?
- What documentation available can provide evidence that software development activities in the R&D claim meet all the eligibility criteria?
- Is your R&D directly or indirectly related to producing a service? Do you know how the “dominant purpose” test could affect your R&D eligibility?
Do you have contemporaneous records to substantiate your R&D activities and expenditure?
Mining
Have you thought about how the following affects your R&D claim?
- At what point can the application or adaptation of existing technology be considered a core R&D activity?
- When do R&D activities actually commence and finish within the overall project?
- Do you know how the feedstock rules apply to your R&D claim?
Do you have contemporaneous records to substantiate your R&D activities and expenditure?
Start-ups
Have you thought about how the following affects your claim?
- Will a capital raising affect your aggregated turnover?
- Does your business structure allow you to claim R&D?
- Have you considered an Early Stage Innovation Company (ESIC) application?
- Do you understand the impact of payments to associates and how this affects your R&D claim?
- Are you planning to expand overseas? Do you know how this can impact your R&D claim?
Do you have contemporaneous records to substantiate your R&D claim and expenditure?
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Contact us
Sophia Varelas
PwC | Private | National Leader - R&D and Government Incentives, PwC Australia
Tel: +61 417 208 230
