The Research and Development Tax Incentive
The Research and Development tax incentive is the Australian Governments key mechanism to encourage industry investment in research and development (R&D) in Australia. Research and development drives important innovation that leads to productivity improvements, economic growth and technological advancements.
Is your company developing a new product or process or simply improving an existing one?
Then it may well be eligible for the Research and Development tax incentive. Each year thousands of businesses claim the R&D tax incentive. It is available to companies across all sectors of Australian commerce and industry. If you feel you may be eligible for the R&D tax incentive, please contact us so we can assist you in assessing your eligibility for the R&D tax incentive.
Contact UsR&D tax offset benefits
Different benefits apply according to company turnover.
Turnover of less than $20 million
Entities with an aggregated turnover of less than $20 million may receive a refundable R&D tax offset rate equal to their corporate tax rate plus an 18.5% premium.
For example, if an entity has $100,000 of eligible R&D expenditure, and has a corporate tax rate of 25%, then the refundable R&D tax offset rate is 43.5% (25% + 18.5%). Depending upon the entity’s financial position, it may be eligible for a cash rebate of $43,500 due to the R&D tax incentive.
Turnover of $20 million or more
Entities with an aggregated turnover of $20 million or more may receive a non-refundable R&D tax offset rate equal to their corporate tax rate plus an incremental premium.
Premium increments are based on the intensity of your R&D expenditure as a proportion of total expenditure for the year.
There are two premium increments:
- R&D intensity up to 2% receives a tax offset equal to the company tax rate plus 8.5% premium.
- R&D intensity above 2% receives a tax offset equal to the company tax rate plus 16.5% premium.
For example, if an entity has $100,000 of eligible R&D expenditure, has a corporate tax rate of 30%, and has a proportion of 10% of its total expenditure incurred on R&D activities, then the non-refundable R&D tax offset rate is 46.5% (30% + 18.5%). Depending upon the entity’s financial position, it may be eligible for a tax offset of $46,500 due to the R&D tax incentive.
Eligibility to claim the Research and Development Tax Incentive
The R&D tax incentive is jointly administered by:
- AusIndustry on behalf of Industry, Innovation and Science Australia, and;
- the Australian Taxation Office (ATO).
Companies need to register their R&D activities with AusIndustry then claim the R&D tax offset through the company’s annual tax return with the ATO.
Eligible entities
- An R&D entity that is either a corporation that is incorporated under an Australian law, or;
- in some circumstances, a foreign corporation.
- Special rules apply to consolidated groups and R&D partnerships.
- Other conditions may also apply, depending on who the R&D activities are being conducted for.
- Have spent a minimum of $20,000 AUD on R&D activities in the financial year, unless;
- A Research Service Provider was used, then there is no minimum spend requirement.
Please see ‘Division 355 - Research and Development’ of the ‘Income Tax Assessment Act 1997’ for more details of eligibility for the R&D tax incentive.