Key 2021 EOFY Australian R&D Tax Incentive Considerations & Deadlines
R&D Tax Incentive - 17 Jun 2021
The end of financial year is just around the corner and now is a perfect time for us to remind you of some important Australian R&D Tax considerations, changes, and deadlines which you should be aware of prior to the end of the financial year and as you continue to plan for your future R&D activities.
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 invoiced and paid prior to 30 June 2021, should you wish to claim the expenditure as a notional R&D deduction in your FY21 claim.
If you have incurred expenditure to associates during FY21, and these payments have not been made prior to 30 June 2021, these will be eligible to be included in the claim for the year in which they are paid.
If your company has incurred eligible R&D expenditure to an associate during the 2021 income year, you should ensure that payment has been made by way of a cash transaction or via constructive payment to extinguish the liability of that expenditure before 30 June 2021 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
We would like to take this opportunity to remind you about the importance of ensuring that as R&D Tax claimants you are keeping adequate evidence of your experimental activities throughout the year. With record-keeping being tested time and time again, and now with a more focused lens from AusIndustry and the ATO, 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 expenditure specific to your industry.
Job Keeper Payments – Are they eligible?
The ATO released a draft tax determination – TD 2020/D1 in relation to notional deductions for R&D activities subsidised by JobKeeper payments. The draft tax determination provides that where employees receive JobKeeper payments and are involved in undertaking R&D activities, that the JobKeeper amounts are excluded from the R&D expenditure calculations.
In accordance with the guidance, where you have been receiving JobKeeper payments in respect of R&D staff, the expenditure is deemed not at risk and you cannot deduct the proportion of wage expenditure incurred on eligible R&D activities that attracted the JobKeeper payment.
R&D Application Form – New Form
The R&D Application process will look a little different this year. AusIndustry has launched its new R&D Portal, and will be available on the business.gov.au website.
The new R&D portal comes with a range of new features including:
- A restructured registration form will be submitted through the portal;
- 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.
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 link below to view the guide.
R&D Tax changes from 1 July 2021
From 1 July 2021, the R&D tax offset rates will change – resulting in more favourable outcomes for most claimants.
For R&D tax claimants with an aggregated turnover of less than AUD$20M, an 18.5% refundable tax offset will be applied and will pegged to the claimant’s company tax rate.
For R&D tax claimants with an aggregated annual turnover of AUD$20M or more, the new tiered R&D intensity measure will offer a non-refundable R&D tax offset of 8.5% for R&D expenditure up to 2% R&D intensity and 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 FY21 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.
Co-written by Kymberly Dryden.
The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions. By reading this blog, you confirm your understanding of this disclaimer.