{"id":32438,"date":"2020-01-13T14:29:45","date_gmt":"2020-01-13T06:29:45","guid":{"rendered":"https:\/\/zegal.com\/?p=32438"},"modified":"2023-01-18T14:08:04","modified_gmt":"2023-01-18T06:08:04","slug":"australian-governments-rd-tax-incentive","status":"publish","type":"post","link":"https:\/\/zegal.com\/en-nz\/blog\/post\/australian-governments-rd-tax-incentive\/","title":{"rendered":"Australian Government\u2019s R&#038;D Tax Incentive"},"content":{"rendered":"<div id=\"contentsContainer\">\n<div id=\"contents\">\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-large wp-image-32458\" src=\"https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/australia-62823_1920-1024x842.jpg\" alt=\"\" width=\"1024\" height=\"842\" srcset=\"https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/australia-62823_1920-1024x842.jpg 1024w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/australia-62823_1920-300x247.jpg 300w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/australia-62823_1920-768x632.jpg 768w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/australia-62823_1920-640x526.jpg 640w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/australia-62823_1920-1200x987.jpg 1200w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/australia-62823_1920.jpg 1920w\" sizes=\"auto, (max-width: 639px) 98vw, (max-width: 1199px) 64vw, 770px\" \/><\/p>\n<p id=\"E435\"><span id=\"E436\" class=\"qowt-font2-Arial\">Are you an Australian company engaging in R&amp;D activities <\/span><span id=\"E438\" class=\"qowt-font2-Arial\">on a daily basis<\/span><span id=\"E440\" class=\"qowt-font2-Arial\">? Or is your company looking to invest in R&amp;D but cash-strapped? If your answer to one of these questions is yes, the Australian government\u2019s R&amp;D Tax Incentive is what you need. With the introduction of this tax incentive package, R&amp;D is no longer exclusive to big corporations with deep pockets.<\/span><\/p>\n<h4 id=\"E443\"><span id=\"E444\" class=\"qowt-font2-Arial\">Are you eligible?<\/span><\/h4>\n<p id=\"E447\"><span id=\"E448\" class=\"qowt-font2-Arial\">A company is entitled to claim the tax offset if it satisfies the following criteria:\u00a0<\/span><\/p>\n<h5><span id=\"E452\" class=\"qowt-font2-Arial\">The company is an eligible R&amp;D entity<\/span><\/h5>\n<p><span id=\"E452\" class=\"qowt-font2-Arial\"> <\/span><span style=\"font-size: inherit;\">An eligible R&amp;D entity can either be a company incorporated under Australian law or a foreign company that is an Australian resident for tax purposes. Trusts are not eligible R&amp;D entities unless it is a public trading trust. Partnerships and JVs are also not eligible R&amp;D entities however the individual incorporated entities within these structures can be eligible.<\/span><\/p>\n<h5><span style=\"font-size: inherit;\">The company undertakes eligible \u2018R&amp;D\u2019 work in the income year<\/span><\/h5>\n<p>Eligible R&amp;D activities include \u2018core R&amp;D activities\u2019 and \u2018supporting R&amp;D <span id=\"E464\" class=\"qowt-font2-Arial\" style=\"font-size: inherit;\">activities\u2019<\/span><span id=\"E466\" class=\"qowt-font2-Arial\" style=\"font-size: inherit;\">. To register, your company must engage in at least one core R&amp;D activity. For detailed requirements to qualify as core or supporting R&amp;D activities, you may visit<\/span><a id=\"E467\" style=\"font-size: inherit; background-color: #ffffff;\" contenteditable=\"false\" href=\"http:\/\/classic.austlii.edu.au\/au\/legis\/cth\/consol_act\/itaa1997240\/s355.25.html\" target=\"_blank\" rel=\"noopener noreferrer\"><span id=\"E468\" class=\"qowt-font2-Arial\"> <\/span><span id=\"E469\" class=\"qowt-font2-Arial\">se<\/span><span id=\"E472\" class=\"qowt-font2-Arial\">ction 355.<\/span><span id=\"E473\" class=\"qowt-font2-Arial\">25 of the Income Tax Assessment Act 1997<\/span><\/a><span id=\"E474\" class=\"qowt-font2-Arial\" style=\"font-size: inherit;\">. But for a brief understanding, eligible R&amp;D work should take on the nature of a scientific experiment, the purpose of which is to generate new knowledge. R&amp;D efforts have to be presentable in the form of a technical idea, through proof of concept and the development of a commercializable prototype.\u00a0 However, some types of activities cannot be counted as core R&amp;D activities, you may refer to section 355(2) for details.<\/span><\/p>\n<p id=\"E476\"><span id=\"E477\" class=\"qowt-font2-Arial\">You don\u2019t have to be in the science or technology industries to claim this tax incentive. It is specifically designed for all businesses making endeavours in R&amp;D. The R&amp;D activities in your company can be carried out with the goal to discover new or improved materials, devices, processes and services. For instance, your company\u2019s R&amp;D activities can be aimed at developing new food <\/span><span id=\"E479\" class=\"qowt-font2-Arial\">lines, or<\/span><span id=\"E481\" class=\"qowt-font2-Arial\"> devising more effective management structures or inventing recycling and green techniques. Companies in all fields can make use of this tax incentive to improve inefficiency or flaws in their current system.\u00a0<\/span><\/p>\n<p id=\"E483\"><strong><span id=\"E484\" class=\"qowt-font2-Arial\">When trying to determine if your R&amp;D efforts qualify, you can ask yourself these questions:\u00a0<\/span><\/strong><\/p>\n<ol style=\"list-style-type: lower-alpha;\">\n<li id=\"E485\" class=\"qowt-li-1_0 qowt-list qowt-stl-ListParagraph\"><span id=\"E486\" class=\"qowt-font2-Arial\">Is the outcome of the experiment an unknown based on current technology and information?<\/span><\/li>\n<li id=\"E487\" class=\"qowt-li-1_0 qowt-list qowt-stl-ListParagraph\"><span id=\"E488\" class=\"qowt-font2-Arial\">Does the R&amp;D activity employ scientific methods?<\/span><\/li>\n<li class=\"qowt-li-1_0 qowt-list qowt-stl-ListParagraph\">Is the R&amp;D investment aimed at discovering something new and novel?<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<div id=\"contentsContainer\">\n<div id=\"contents\">\n<p id=\"E494\"><span id=\"E495\" class=\"qowt-font2-Arial\">However, once you start the actual production of your new product or the implementation of a new system based on your R&amp;D discoveries, activities afterwards would fall outside the scope of R&amp;D. For example, efforts in conducting market research, ensuring quality control, fixing bugs or writing training manuals will not be <\/span><span id=\"E497\" class=\"qowt-font2-Arial\">taken into account<\/span><span id=\"E499\" class=\"qowt-font2-Arial\">. In a nutshell, R&amp;D only includes projects in the early stage. And although the tax incentive is generally applicable to industries across the board, research in arts and humanities do not qualify for it.\u00a0<\/span><\/p>\n<p id=\"E502\"><span id=\"E503\" class=\"qowt-font2-Arial\">Successful R&amp;D can bring great rewards and opportunities to the company. However, it\u2019s not rare for R&amp;D attempts to be futile. The approval of your R&amp;D Tax Incentive application does not hinge on an entirely successful outcome of your R&amp;D work. However, payments are made based on the achievement of agreed project milestones. So it is important to set realistic milestones with <\/span><span id=\"E505\" class=\"qowt-font2-Arial\">a\u00a0 reasonable<\/span><span id=\"E507\" class=\"qowt-font2-Arial\"> timeline so that you can reimburse the amount spent on each step of the project.<\/span><\/p>\n<h5 id=\"E510\" class=\"qowt-li-4_0 qowt-list qowt-stl-ListParagraph\"><span id=\"E511\" class=\"qowt-font2-Arial\">Your company\u2019s total notional deductions for the income year are at least AU$20,000<\/span><span id=\"E513\" class=\"qowt-font2-Arial\">\u00a0<\/span><\/h5>\n<p id=\"E514\"><span id=\"E515\" class=\"qowt-font2-Arial\">If your total notional deductions are less than $20,000, you can check out the Co-operative Research Centre (CRC) program or register as a Research Service Provider for other types of tax allowances.<\/span><\/p>\n<p id=\"E516\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-large wp-image-32464\" src=\"https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/income-tax-491626_1920-1-1024x683.jpg\" alt=\"\" width=\"1024\" height=\"683\" srcset=\"https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/income-tax-491626_1920-1-1024x683.jpg 1024w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/income-tax-491626_1920-1-300x200.jpg 300w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/income-tax-491626_1920-1-768x512.jpg 768w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/income-tax-491626_1920-1-640x427.jpg 640w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/income-tax-491626_1920-1-1200x800.jpg 1200w, https:\/\/zegal.com\/wp-content\/uploads\/2020\/01\/income-tax-491626_1920-1.jpg 1920w\" sizes=\"auto, (max-width: 639px) 98vw, (max-width: 1199px) 64vw, 770px\" \/><\/p>\n<h4 id=\"E518\"><span id=\"E519\" class=\"qowt-font2-Arial\">How much is the tax worth?<\/span><\/h4>\n<p id=\"E522\"><span id=\"E523\" class=\"qowt-font2-Arial\">The value and nature of the offset will depend on the company\u2019s turnover and the degree of R&amp;D expenditure incurred in a given year. There are broadly two categories:<\/span><\/p>\n<h5 id=\"E526\" class=\"qowt-li-2_0 qowt-list qowt-stl-ListParagraph\"><span id=\"E527\" class=\"qowt-font2-Arial\">Companies with an aggregated turnover of less than AU$20m<\/span><\/h5>\n<p id=\"E529\"><span id=\"E530\" class=\"qowt-font2-Arial\">These companies are eligible for the 43.5% Refundable R&amp;D Tax Offset. In the past, most tax offsets introduced by the government can only reduce the amount of tax you pay to zero \u2013 which means the excess amount is forfeited even if your tax offsets are greater than your tax liabilities. However, for the new scheme, the excess amount is refundable and goes to your bank account! If your company is in a tax loss position, the new scheme gives you a significant cash flow advantage, when compared with the R&amp;D expenditure increasing a carry forward loss.<\/span><\/p>\n<h5 id=\"E533\" class=\"qowt-li-2_0 qowt-list qowt-stl-ListParagraph\"><span id=\"E534\" class=\"qowt-font2-Arial\">Companies with an aggregated turnover over AU$20m or less<\/span><\/h5>\n<p id=\"E536\"><span id=\"E537\" class=\"qowt-font2-Arial\">These companies are still eligible for a 38.5% non-refundable tax offset.<\/span><span style=\"font-size: inherit;\">\u00a0<\/span><\/p>\n<\/div>\n<\/div>\n<div id=\"contentsContainer\">\n<div id=\"contents\">\n<p id=\"E540\"><span id=\"E541\" class=\"qowt-font2-Arial\">The annual turnover refers to the total income your company derived in the income year. It also includes the turnover of any entity connected or affiliated with your primary company, except profit generated from transactions between your primary and affiliated company. For companies that only carried on business for part of the income year, a reasonable estimate of the company\u2019s annual income will be applied.<\/span><\/p>\n<h4 id=\"E545\"><span id=\"E546\" class=\"qowt-font2-Arial\">How to claim the tax offset?<\/span><span id=\"E548\" class=\"qowt-font2-Arial\">\u00a0<\/span><\/h4>\n<p id=\"E549\"><span id=\"E550\" class=\"qowt-font2-Arial\">The R&amp;D Tax Incentive operates on a self-assessment basis. You <\/span><span id=\"E552\" class=\"qowt-font2-Arial\">have to<\/span><span id=\"E554\" class=\"qowt-font2-Arial\"> determine for yourself whether the R&amp;D activities your company is conducting and the amounts you wish to claim do qualify for the scheme. Your application registering your R&amp;D activities must be lodged within 10 months after year-end and before you lodge your company tax return. It is necessary to register separately for each income year that you wish to claim the tax offset.<\/span><\/p>\n<h4 id=\"E557\"><span id=\"E558\" class=\"qowt-font2-Arial\">Conclusion<\/span><\/h4>\n<p id=\"E561\"><span id=\"E562\" class=\"qowt-font2-Arial\">It is high time we recognised that R&amp;D is not reserved for tech companies and think tanks in laboratories. The tax package is designed to cover a broad range of companies, including commercially-focused operations. By date, over 12,000 companies are claiming entitlements under the R&amp;D Tax Incentive scheme. If your company has these eligible R&amp;D activities, do not hesitate to apply for this tax scheme to relieve your company\u2019s funding pressure.<\/span><\/p>\n<p class=\"p1\" style=\"text-align: center;\"><b><i>This article does not constitute legal advice.<\/i><\/b><\/p>\n<p class=\"p2\" style=\"text-align: center;\"><i>The opinions expressed in the column above represent the author\u2019s own.<\/i><\/p>\n<p class=\"p3\" style=\"text-align: center;\"><span class=\"s1\"><a href=\"https:\/\/register.zegal.com\/\"><b>Start managing your legal needs with Zegal today<\/b><\/a><\/span><\/p>\n<p><a href=\"https:\/\/zegal.com\/blog\/post\/labour-hire-licencing-act-in-australia-what-you-need-to-know\/\">RELATED READING: Labour Hire Licencing Act in Australia<\/a><\/p>\n<p><a href=\"https:\/\/zegal.com\/blog\/post\/6-great-e-signature-apps\/\">READ MORE: 6 Great E-signature Apps<\/a><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are you an Australian company engaging in R&amp;D activities on a daily basis? Or is your company looking to invest in R&amp;D but cash-strapped? If your answer to one of these questions is yes, the Australian government\u2019s R&amp;D Tax Incentive is what you need. With the introduction of this tax incentive package, R&amp;D is no [&hellip;]<\/p>\n","protected":false},"author":51,"featured_media":32458,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","inline_featured_image":false,"footnotes":""},"categories":[14278],"tags":[1812,9992,10307],"usecases":[],"businesstypes":[],"country":[],"class_list":["post-32438","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-management","tag-australia","tag-smes","tag-z-syndicate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.8 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Australian Government\u2019s R&amp;D Tax Incentive | Zegal New 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