R&D Tax Incentive: How To Maximise Your Claim
Before lodging a claim, your company must first ensure it qualifies as an R&D entity. Under Australian law, an R&D entity is usually a corporation incorporated in Australia, though some foreign corporations may also be eligible.
To self-assess, visit AusIndustry’s Program Snapshot or refer to their R&D tax incentive customer information guide, which provides detailed guidance.
If you’re unsure about your company’s eligibility, it’s essential to either contact AusIndustry or consult with a registered tax agent to avoid costly mistakes.
R&D Tax Incentive: How To Maximise Your Claim
Did you know that Australian businesses claimed over $11.2 billion in R&D tax benefits in the fiscal year 2021-22?
Yet many companies still leave money on the table by not maximising their R&D tax incentive claims.
The Research and Development (R&D) Tax Incentive offers valuable tax offsets to Australian companies engaged in eligible R&D activities.
However, ensuring that you’re making the most out of this benefit requires careful planning and adherence to the program’s rules.
Below are the steps to help you understand the process and maximise your claim.
Key Steps To Maximise Your Claim
1) Self-Assess Your Eligibility
Before lodging a claim, your company must first ensure it qualifies as an R&D entity. Under Australian law, an R&D entity is usually a corporation incorporated in Australia, though some foreign corporations may also be eligible.
To self-assess, visit AusIndustry’s Program Snapshot or refer to their R&D tax incentive customer information guide, which provides detailed guidance.
If you’re unsure about your company’s eligibility, it’s essential to either contact AusIndustry or consult with a registered tax agent to avoid costly mistakes.
2) Determine Eligible R&D Activities
The next step is to classify your R&D activities as either core R&D or supporting R&D activities:
- Core R&D activities are experimental and based on established scientific principles. These activities must aim to generate new knowledge, whether that’s in the form of new products, processes, or services.
- Supporting R&D activities are those that are directly related to core R&D activities and are essential for completing the core research.
If you’re uncertain whether your activities meet these criteria, you can apply for an Advance Finding or Overseas Finding through AusIndustry.
These rulings provide clarity on the eligibility of your R&D activities before you lodge a claim, minimising the risk of audit or penalties.
If you received a GST assurance rating before 30 June 2024, you’ll need to start lodging the Supplementary Annual GST Return from the 2024–25 financial year onwards. Failure to lodge the return by the due date may result in penalties.
3) Keep Detailed Records
Accurate record-keeping is crucial to maximise your R&D claim. Documentation should clearly demonstrate the nature of the R&D activities and the expenses incurred.
The records must show how the activities meet the eligibility criteria and justify the associated expenditure.
This not only helps in substantiating your claim but also prepares you in case of a compliance review by the ATO. Regularly review the ATO’s Compliance Readiness Guide on record-keeping for R&D claims.
4) Register Your R&D Activities
Once you determine your eligibility and activities, you should lodge your R&D activities with AusIndustry before claiming your tax offset. It is a legal requirement to lodge an application with AusIndustry for each financial year and needs to be lodged within 10 months of the end of your company’s income year.
Do remember registration with AusIndustry doesn’t confirm your claim eligibility, but just allows you to apply for the tax offset.
Always ensure that the information both to AusIndustry and ATO would be the same for neither would you want some kind of penalty.
5) Understand Adjustments To Claims
Sometimes you may need to adjust your tax claim due to some reasons.
- Clawback adjustments apply where you’ve experienced government recoupment from your R&D activities, which can thereby reduce your tax offset.
- Feedstock adjustments apply where your R&D activities have led to marketable products or products used within your business.
Of course, it bears mentioning here that any of these adjustments may apply to your claim.
6) Lodging Your Claim
Once you have registered your activities you must lodge your R&D tax incentive schedule in conjunction with your company tax return. The ATO has an R&D Tax Incentive Calculator to aid you in calculating your entitlement.
Be cautious when lodging your application. Overstated or false claims will attract penalties and inconsistencies between what you report to AusIndustry and what is recorded by the ATO may trigger an audit. Only those R&D costs eligible for claim should be lodged. Their documentation should also be proper.
7) Using A Registered Tax Agent Or R&D Consultant
If it looks too cumbersome, then you might consider seeing a registered tax agent or R&D consultant.
However, the appointment of a consultant does not guarantee acceptance. Be sure to use a registered and experienced tax agent with some experience in handling R&D claims.
Be cautious when new agents or consultants approach you by promising big claims without having a look at it. Aggressive claims may ring the alarm bell for ATO and may attract penalties.
Want To Maximise Your R&D Tax Claim?
At KPG Taxation, we know all the complexity involved in the R&D Tax Incentive and are here to help you through the whole process. Our tax accountant will not only ensure your claim is right and compliant but also optimised for maximum benefits.
With our customised approach, you will get just the right, professional advice and uninterrupted support to get the best refund possible. We will worry about the little things while you focus on growing your business.
- Categories
- Tax
Focus On Growing Your Business, Leave The Accounting On Us!
- Income Tax : File your taxes & get the best claims & returns.
- Accountancy : Hire expert accountants to manage your transactions.
- Bookkeeping : Let us handle your record books and expense reports.
- Business Advisory : From company set-up to payroll, we handle it all.