The Australian government’s new research and development scheme, known as R & D Tax Incentive, commenced from the 1st July 2011 and applies to research and development expenditure incurred after that date.
The new tax incentive has 2 components – The first relates to companies with turnovers up to $20 million per annum. These companies are entitled to claim 45% refundable tax offset for eligible R & D expenditure. Other companies are able to claim 40% non-refundable tax offset. Key changes that have been made to the previous R & D system include:
- Removal of the $2 million cap on R & D expenditure for companies with turnovers of under $5 million.
- Replacement of the 10% cap on the amount of overseas expenditure that could be expended as part of an R & D project.
- R & D plans are no longer required, but the legislation sets out the requirements for record keeping and we therefore suggest that companies continue to prepare R & D plans as part of their corporate record keeping to satisfy Aus Industry and the Australian Taxation Office that appropriate procedures have been adopted for each R & D project.
Registration needs to be made on an annual basis. This can be made up to 10 months after the end of the financial year, so the first deadline for registration, under the R & D tax incentives, will be 30th April
2013.
The legislation introduces the concept of companies being able to apply for Advance Findings. This is an application that goes to Aus Industry to enable them to issue a written finding as to whether a proposed R & D project is eligible expenditure under the R & D Tax Incentive. Advance Findings apply for the financial year in which they were given and to 2 subsequent financial years.
If you are conducting research & development in the current financial year, we recommend that you have a discussion with us in relation to the record keeping requirements of the R & D Tax Incentive and the possibility of applying for an Advance Finding.
