The NEW Research and Development Tax Incentive - Are You Eligible?

The government has rewritten the laws regarding research and development tax concessions. The reforms generally provide for more generous concessions and make these available to a wider range of businesses than previously.  

What tax offsets are available? 

There are two types of tax offsets available for eligible research and development expenditure: 

• A refundable 45% tax offset (equivalent to 150% Deduction) which applies to Research and Development entities with an aggregated turnover of less than $20m p.a.  The advantage of this offset is that if a Research and Development company is in a loss position, any excess tax offset is refundable to the company.  
• A non-refundable 40% tax offset (equivalent to a 133% deduction) which applies to Research and Development entities with an aggregated turnover of more than $20m p.a.

Does It Apply To You?

The R&D Tax Incentive is available to:

• Companies incorporated in Australia (in other words, it is not  available to trusts, partnership and sole traders);
• Foreign companies that are ‘residents’ for tax purposes;
• Foreign companies that are under a Double Taxation Agreement and carry out Research and Development activities in Australia through a branch.    

In addition, a company needs to spend money on ‘eligible Research and Development activities’ or own depreciable tangible assets that are used in ‘eligible Research and Development activities’ in order to qualify for one of the offsets mentioned above.

What Do You Need to Do?

If you haven’t previously claimed R&D tax concessions then reconsider – you may be undertaking ‘eligible Research and Development activities’ without realising it.

If you have claimed before determine how the changes affect you:

• Review the changes to R&D planning.
• Consider the new requirement to split R&D activities into core and supporting activities.
• Consider the new franking impacts of the R&D Tax Incentive.

The DKM Group can help you to determine whether you qualify for the R&D Tax Incentive and assist you through the claim process which can be complex.  Please contact your local client service advisor to discuss any aspect of the new R&D Tax Incentives for your business.