Key 2022 EOFY Australian R&D Tax Incentive Considerations & Deadlines
R&D Tax Incentive - 27 Jun 2022
With the end of the financial year just around the corner we would like to remind you of some important Australian R&D Tax considerations, changes, and deadlines as you close out 2022.
Claiming Payments to Associates
If you have incurred expenditure to an associate (i.e. an entity or individual with a ‘majority voting interest’ or ‘sufficient influence’ over your company) these amounts are required to be both incurred and paid prior to 30 June 2022, should you wish to claim the expenditure as a notional R&D deduction in your FY22 claim.
If you have incurred expenditure to associates during FY22, and these payments have not been made prior to 30 June 2022, you are still able to carry forward and claim the amount in subsequent years, following payment.
If your company has incurred eligible R&D expenditure to an associate during FY22, you should ensure that the costs of work have been invoiced by the associate and payment has been made by way of a cash transaction or via constructive payment to extinguish the liability of that expenditure before 30 June 2022 to claim the R&D tax offset for that period.
Have you undertaken R&D activities overseas?
An Australian entity is eligible to claim R&D expenditure incurred on Overseas Activities provided that an Application for an Advance/Overseas Finding is lodged by the end of the income year in which the activities are undertaken, and the following conditions are met:
- The overseas R&D activity must not be able to be conducted in Australia, or its external territories;
- The overseas R&D activity must have a significant scientific link to an Australian core R&D activity; and
- The expenditure on overseas activities is less than the expenditure on project activities conducted in Australia.
If you believe you have undertaken an eligible R&D activity overseas and would like to apply for an Advance/Overseas Finding, please contact us immediately.
Contemporaneous records for R&D activities
With tax governance and record-keeping being tested time and time again and key focus areas of review by the regulators, if you are conducting or considering R&D activities as an ongoing strategy in your business, evidence is key.
Evidence should be contemporaneous and be kept around the time that you plan and conduct your activities, to evidence why and how you conduct the R&D activities and substantiate your self-assessment process. The evidence you capture before or around the time you conduct your activities is the strongest evidence of your R&D activities and the expenditure you incurred on those activities.
Please reach out and ask us for further clarity around what constitutes evidence of your activities and how expenditure can be tracked specific to your industry.
Is your R&D expenditure at risk?
In December 2021, the ATO released a tax ruling – TR 2021/5 in relation to the “at risk” rule applicable to notional deductions for R&D activities.
The tax ruling is intended to provide clarity in relation to aspects of the R&D legislative provisions which specifically exclude expenditure which is ‘not at risk’. This will include arrangements where you (or your associate) could reasonably be expected to receive an amount of consideration as a direct or indirect result of the expenditure being incurred; and irrespective of the results of the R&D activities.
For example, if R&D is being conducted in relation to the delivery of contracted works/services to a third party, these arrangements may trigger these provisions particularly if consideration is expected to be received irrespective of the results of the R&D activities (e.g. payment received even upon project failure).
R&D Application – Online Portal
We are now in the second year since AusIndustry has launched its new R&D Portal (access available on the business.gov.au website).
The online R&D portal comes with a range of new features including:
- The ability to see the status of your application in real-time as well as indicators for when submission deadlines are approaching; and
- Improved security with the use of MyGovID.
For first time portal users, we have prepared a step-by-step guide on how to register for the Online Portal, and authorising portal access for ABA Legal Group, to enable us to lodge on your behalf. Click on the following link to view the guide – ABA GUIDE TO REGISTER FOR ONLINE PORTAL
R&D Tax changes from 1 July 2021 (FY22)
FY22 will see further reductions in company tax rates, and in some cases an increase in the tax benefit under the R&D Tax Incentive. From 1 July 2021, these changes will include:
Companies with an aggregated turnover less than AUD$20M may receive a refundable R&D offset rate equal to your corporate tax rate (25%) plus an 18.5% premium resulting in a Refundable Tax Benefit of 43.5% if matched by tax losses, or 18.5% when trading in profit (increased from 17.5%).
Companies with an aggregated annual turnover AUD$20M or more my receive a non-refundable R&D tax offset rate equal to your corporate tax rate plus an incremental premium. The new 2-tiered R&D intensity measure will offer a non-refundable R&D tax offset of:
- 5% for R&D expenditure up to 2% R&D intensity; and
- An additional 16.5% for R&D expenditure above 2% R&D intensity.
The new R&D intensity measure is looking to reward companies that have a higher R&D intensity and evidencing and documenting your R&D activities in support of your R&D intensity will be critical.
Reach out to us now and find out how the new R&D intensity measure might impact your claim and how we can assist you with the capture and identification of your R&D activities in support of your R&D intensity.
All set? Talk to us about kicking off your FY22 claim early to get access to your R&D Tax benefits sooner rather than later!
Speak to our team of experienced consultants today to see how we can help you with any of the items above. Get in touch here.